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January 6, 2015

Brazilian State of Rondonia expands Soybean Acreage by 26%

Brazilian farmers continued to expand their soybean acreage in 2014/15 and one of the areas where the expansion has been the greatest this growing season is in the state of Rondonia. Rondonia is the state that adjoins the northwest corner of Mato Grosso. The entire state lies within the Amazon Drainage Basin and the vegetation in the state is mostly Amazon Rainforest, but there are some smaller areas of cerrado in the southern part of the state.

The state of Rondonia has been the "poster child" for environmentalists decrying deforestation in the Amazon Region. Nearly all the land clearing in the state has been for the expansion of cattle ranching, but fortunately the pace of illegal clearing has been greatly reduced in recent years due to stricter environmental regulations. As a result, many ranchers are now converting some of their pastures to soybean production as a way to expand their operations. This has been the trend all across Brazil in recent years as new environmental laws make land clearing more difficult.

According to the latest assessment from Conab, farmers in the state increased their soybean acreage 26% from 607,000 hectares in 2013/14 to 768,000 hectares in 2014/15. As a comparison, the farmers in the neighboring state of Mato Grosso will plant slightly more than nine million hectares of soybeans this growing season. Soybean production started a number of years ago in the southern part of the state and it has continued to expand through the middle of the state as the network of grain elevators and transportation facilities expanded.

Heavy rainfall during the summer months has allowed the soybean yields in Rondonia to be some of the highest in Brazil at 3,349 kg/ha or 48.5 bu/ac. The state also offers lower transportation costs compared to other states due to the fact that a barging operation already exists in the state. The capital of the state, the city of Porto Velho, lies on the banks of the Madeira River and barging operations transporting soybeans to ports on the Amazon River were started on the river over a decade ago. It has become such a popular route for exporting soybeans from western Mato Grosso, that these port operations have outgrown their current location in the heart of the city.

Increased truck traffic in the city and the desire to expand the port operations has led city leaders to start the construction of a new and expanded port outside of the city. The new port facility will not only accommodate more grain shipments, but it will also be able to handle regular containers as well as refrigerated containers containing some of the beef produced in the state.

While soybean yields in the state are high, production costs are high as well due to the high cost of inputs. Brazil imports more than 70% of its fertilizers and fertilizers are a key component of the cost of producing soybeans in Brazil. The already high cost of imported fertilizers will probably get even higher in 2015 due to the weakening of the Brazilian currency. While a weaker currency will benefit Brazilian farmers in the short term when they sell their 2014/15 grain production, it will drive up the costs of imported inputs for the 2015/16 growing season.