December 23, 2010

2011 Could be the Best Year in Seven for Brazilian Soy Producers

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

There is still a long way to go before the 2010/11 soybean crop is in the bin, but Brazilian soybean producers are confident that this may end up being their most profitable year in the last seven years for growing soybeans. In addition to strong soybean prices, the cost of inputs were lower this year and even their most feared disease, soybean rust, has been slow to appear in the Brazilian soybean fields thus far this growing season.

According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers in Brazil may have actually been too anxious to forward sell their soybeans and as a result, they may have missed out on even better prices for their soybeans. Imea estimates that farmers in Mato Grosso have already sold approximately 65% of their anticipated production, but the president of Aprosoja, Glauber Silveira da Silva, feels it might be as high as 72% to 75%.

As President Silva explained, the situation was not very good for soybean farmers in June of 2010 when they were putting together their planting plans for the 2010/11 growing season. Therefore, when soybean prices reached US$ 15 per sack they started to forward contract some of their anticipated production with the multinational grain companies in order to purchase the needed inputs for the crop.

The current soybean prices in Mato Grosso is now much higher at approximately US$ 22 per sack, but unfortunately, most of the farmers have already priced their soybeans at the lower levels. He estimates that the average price obtained by farmers in the state is between US$ 17.50 and US$ 18.00 per sack.

Even if the farmers sold most of their production below the current market prices, the profit margins for soybean producers in central Brazil should be good this year due to the lower cost of production (chemicals and fertilizers).

In southern Brazil, the profit margins should be outstanding this growing season. Soybean producers in Parana for example planted their crop in a timely manner and over 90% of the crop is rated in good condition. Yields should be good in Parana and the cost of transporting their soybeans to the nearby ports is much less than the transportation costs from Mato Grosso. During the peak of the harvest when freight rates are the highest, it could cost as much as US$ 3.20 to US$ 3.50 per bushel to transport soybeans from central Mato Grosso to the Port of Paranagua. For farmers in Parana, the cost of transporting their soybeans to the nearby Port of Paranagua might only be US$ 0.50 per bushel. With such a huge saving in freight costs, soybean farmers in southern Brazil are poised to have a very good year growing soybeans.