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March 26, 2015

Soybean Production continues to expand in Northeastern Brazil

After two consecutive years of adverse weather, the soybean farmers in Brazil's northeastern agricultural frontier are breathing a little easier this harvest season. Soybean yields are still variable and not everyone received the rainfall needed for a full harvest, but it is an improvement over the last two growing seasons. Additionally, the weakening Brazilian currency has given producers an unexpected price boost for their soybeans just as the harvest begins.

The northeastern agricultural frontier region of Brazil is known as Matopiba which is a combination of the first two letters of the four states that comprise the region - Maranhao, Tocantins, Piaui, and Bahia. The sparse cerrado vegetation in the region is easily cleared for agricultural production and it has been a favored region for expansion for farmers moving north from southern Brazil.

The region will produce approximately 10% of Brazil's 2014/15 soybean crop due to an increase in acreage and improved yields, which are expected to average 2,940 kg/ha (42.6 bu/ac). The state of Bahia is the principal soybean producing state in the region responsible for 38% of the soybean acreage followed by Tocantins with 23%, Maranhao with 19%, and Piaui with 19%. In addition to soybean production, farmers in western Bahia also planted approximately 475,000 hectares of full-season corn as well.

The rainfall in the region is not as generous as it is in other parts of Brazil and the summer growing season can be interrupted by periods of dry weather, which has been the case the last several years. The summer rainy season starts later in northeastern Brazil and therefore the soybean planting occurs later in Matopiba than in other regions of Brazil. The soybean harvest is just now getting underway in the region while in states such as Mato Grosso, the soybean harvest is already nearly complete.

The lure for farmers to the region is cheap and available land to expand their operations. The infrastructure in the region is still underdeveloped and lagging the expanding production, but the transportation costs in the region are relatively low due a nearby rail line and its close proximity to a new grain port in the city of Sao Luis on Brazil's northeastern Atlantic Coast.

In recent years, the soybean expansion in the region has averaged approximately 5% per year, but low prices and higher cost of production are expected to limit investments in the region in 2015/16 and the soybean acreage is expected to increase 1-2% during the next growing season.