August 31, 2011

Brazil Corn Acreage up 4-5%, Substituting for Soy in S. Brazil

As the U.S. growing season approaches its final two months, our focus now starts to shift to the Southern Hemisphere. One of the first things we are going to look at is the mix between full-season corn and soybean production in southern Brazil, notably the states of Parana, Santa Catarina, and Rio Grande do Sul. Since full-season corn and soybeans are both planted at the start of the growing season, they compete for the same acreage in southern Brazil. Most of the agricultural areas of Parana and Rio Grande do Sul are planted full so increasing acreage of one crop generally takes away from the other.

After two seasons of declining full-season corn acreage in southern Brazil, the strong domestic corn price is encouraging farmers in southern Brazil to plant more full-season corn in 2011/12. More full-season corn acreage is also expected to be planted in the states of Minas Gerais and Goias as well. Total full-season corn acreage in Brazil is expected to increase 4-5% in 2011/12 to 8.15-8.22 million hectares.

It's a little early to say for sure what is going to happen to the safrinha corn acreage in Brazil, but all indications point to a larger safrinha corn acreage as well. High prices buy acres and that is what happened last year and it is expected to happen again this growing season with the safrinha corn acreage. Initial estimates for the total Brazilian corn production for the 2011/12 growing season is 57.0 million tons. This represents a significant increase over 2010/11, but we can't say how much because last year's total corn production in Brazil is still in dispute. The USDA estimates 55 million tons of corn for 2010/11, Conab estimates 56.3 million tons, but many analysts including myself feel the production was closer to 52-53 million tons.

As mentioned, if the full-season corn acreage increases in southern Brazil, it could limit any potential increase in soybean acreage in the states of Parana and Rio Grande do Sul. As a result, the soybean acreage in southern Brazil is expected to remain unchanged in the 2011/12 growing season.

Below are some cost of production estimates for soybeans and corn in several locations in southern Brazil. Cost of production figures in Brazil usually vary widely due to: lack of uniformity in how the costs are calculated, wide swings in yield estimates, and varying prices for inputs due to transportation costs. When these costs are converted to dollars per bushel, the currency exchange rate becomes very important. For the sake of these calculations, the exchange rate used was 1.6 Brazilian reals per U.S. dollar.

In past years, many Brazilian farmers calculated their expenses by looking at how many sacks of soybeans it took to pay all their production costs. In that way, it eliminates the complicated calculations trying to take into consideration the changing soybean price, changeable exchange rates, and hyper inflation that was so common in Brazil during the 80's, 90's, and early 2000's. Farmers in Brazil still today talk about how many sacks of soybeans are needed to purchase land, fertilizers, or a new tractor.

The figures below came from industry sources and as you can see they vary widely in the costs and the yields obtained, but they do give a broad idea of some of the production costs in southern Brazil.

2011/12 Corn Production Costs - Southern Brazil

LocationCost per hectareYieldCost per bu.
Campo Mourao (Parana)R$ 2,280 per/ha7,000 kg/ha (107 bu/ac)$ 5.27 per/bu
Western ParanaR$ 1,600 per/ha4,200 kg/ha (64 bu/ac)$ 6.10 per/bu
DERAL (Parana Extension)R$ 2,350 per/ha7,200 kg/ha (110 bu/ac)$ 5.33 per/bu
Santa CatarinaR$ 2,300 per/ha7,200 kg/ha (110 bu/ac)$ 5.27 per/bu
Passo Fundo (RGDS)R$ 2,163 per/ha5,400 kg/ha (83 bu/ac)$ 6.50 per/bu

2011/12 Soybean Production Costs - Southern Brazil

LocationCost per hectareYieldCost per bu.
Campo Mourao (Parana)R$ 1,555 per/ha3,000 kg/ha (43.5 bu/ac)$ 8.90 per/bu
Western ParanaR$ 980 per/ha3,000 kg/ha (43.5 bu/ac)$ 5.63 per/bu
DERAL (Parana Extension)R$ 1,699 per/ha3,000 kg/ha (43.5 bu/ac)$ 9.74 per/bu
Santa CatarinaR$ 1,200 per/ha3,000 kg/ha (43.5 bu/ac)$ 6.89 per/bu
Passo Fundo (RGDS)R$ 1,492 per/ha2,500 kg/ha (36.3 bu/ac)$ 10.30 per/bu