January 27, 2016

30% of the Soybeans in Mato Grosso Rated Poor to Very Poor

In their third assessment of the condition of the soybean crop in Mato Grosso, the Mato Grosso Institute of Agricultural Economics (Imea) estimated that 30% of the soybeans in the state are rated poor to very poor in condition. Overall, Imea now rates the soybean crop in the state as 30% poor to very poor, 41% average, and 29% good to excellent.

Northeastern Mato Grosso is the worst area with 41% of the soybeans rated poor to very poor. In central Mato Grosso, which has the most soybeans grown in the state, the soybeans are rated 29% to 31% poor to very poor with southeastern Mato Grosso rated 24% poor to very poor. The definition of a poor to very poor crop are soybeans expected to yield less than 50 sacks per hectare or 43.5 bushels per acre.

The worst rated soybeans are the soybeans that were planted in September and October because those soybeans received the full brunt of the hot and dry weather during November and December. In some of the hardest hit areas, the crop went as much as 40 days without a rain while the temperatures were very hot.

The soybean harvest has started in central Mato Grosso where 40% of the state's soybeans are grown and the yields being reported are extremely variable from a low of 10 sacks per hectare (9 bu/ac) to a high of 60 sacks per hectare (52 bu/ac). The unusual thing this year is that the high and low yields may only be a few miles apart due to the irregular distribution of the rains this growing season. In the hardest hit areas, some farmers even abandoned their soybeans and planted corn instead.

Farmers who are expecting the lowest yields are very concerned because the 2015/16 soybean crop was the most costly soybean crop they ever planted. The weakened Brazilian currency resulted in very high fertilizer and chemical costs because these inputs are mostly imported. According to a report in the Diario de Cuiaba, in the municipality of Sorriso in central Mato Grosso, the cost of producing the 2015/16 soybean crop is approximately R$ 3,000 per hectare or about US$ 304 per acre using an exchange rate of 4 Brazilian reals per dollar.

The exchange rate can greatly alter the cost of production figure so an easier way to look at the cost is to calculate how many sacks of soybean production it takes to cover the costs. In Sorriso, the president of the local Rural Syndicate estimates that it would take 41 to 44 sacks per hectare to cover their costs or 35 to 38 bushels per acre. Obviously, a lot of producers in central Mato Grosso are not going to cover their costs this year, in spite of the nearly record high domestic soybean prices in Brazil. Many of these farmers are hoping that their second crop of crop will help to cover their losses from the first crop of soybeans.

Sorriso is the largest soybean producing municipality in Brazil and it usually produces about 2.2 million tons of soybeans, but this year the soybean yields are expected to be down 15% to 20% compared to average and the municipality is expected to produce 400,000 tons less than earlier expected. The state of Mato Grosso is expected to produce approximately 28% of Brazil's total 2015/16 soybean crop.