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March 17, 2014

Uruguay Farmers Continue to Increase their Soybean Production

The country of Uruguay has long been known for its ranching enterprises, both cattle and sheep, but a new crop has been making inroads into the country – soybeans. The USDA is estimating that Uruguay will produce slightly more than 3 million tons of soybeans in 2013/14, which is a significant increase from the 1.8 million tons produced in 2010/11. As long as soybean prices stay attractive, soybean production in Uruguay is expected to continue increasing.

The first significant row crop to be produced in Uruguay was rice and many of the rice producers were Brazilian farmers who moved across the border from the city of Baje in southern Rio Grande do Sul. Those rice fields are now slowly giving way to soybeans not only in northeastern Uruguay, but also in western Uruguay along the Uruguay River.

Farmers are also converting some of their pastureland into soybean production as well due to the profitability of soybeans. The average soybean yields in the country are only slightly behind neighboring Argentina and Brazil and catching up quickly. Farmers in the country also have relatively low transportation costs because of the close proximity to Brazil's southernmost port of Rio Grande.

Many of the soybean producers in Uruguay are the same Brazilian farmers who moved to the country to produce rice and now soybeans are replace some of the rice acres.

Many farmers rent land for their soybean production, but renting is becoming more expensive and rare. Land owners in northeastern Uruguay are asking for rent in the range of US$ 200 per hectare (approximately US$ 81 per acre) or seven sacks of soybeans per hectare (6 bushels per acre).

Land prices along the border with Brazil are going for US$ 5,000 per hectare (approximately US$ 2,000 per acre), which is about 20% higher than on the Brazilian side of the border.

The trend in Uruguay mirrors what has been happening in southern Rio Grande do Sul for many years. In years past, southern Rio Grande do Sul was almost exclusively cattle ranching, but pastureland continues to give way to soybean production. A similar trend is happening all across Brazil as new environmental regulations makes it harder to clear new land, but there are no such regulations restricting the conversion of pastureland to row crop production. In fact, this trend is highly encouraged by the government.