March 7, 2011

Farmers in Parana Expecting High Profit Margins in 2010/11

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

The farmers in Parana are anticipating a very good year with high yields and high prices at the same time. With approximately 20% of the soybeans harvested in the state, the average yield is in the range of 55 sacks per hectare (3,300 kg/ha or 48 bu/ac) with some farmers reporting 60 sacks per hectare (3,600 kg/ha or 52 bu/ac). Soybean prices are also very good with the average price in northwest Parana at R$ 42 per sack (US$ 11.45 per bushel) or 37% more than in 2010.

In northwest Parana, the average cost of growing soybeans is calculated at R$ 1,300 per hectare and gross receipts are in the range of R$ 2,300 per hectare resulting in a profit margin of 78%. For those farmers with the highest yields, their profit margins are approaching 95%. Some farmers may not achieve these margins because they forward contracted their soybeans at lower levels, but they are still going to do very well. An additional word of caution is the fact that the crop is not yet harvested and adverse weather during harvest could negatively impact the yield and the quality of the soybeans.

The situation for corn looks equally as positive. The average corn yield statewide is expected to be 150 sacks per hectare (9,000 kg/ha or 138 bu/ac) with some of the top yields as much as 170 sacks per hectare (10,200 kg/ha or 157 bu/ac). The average price of corn in northwestern Parana is R$ 23 per sack which results in gross receipts per hectare of R$ 3,450. The cost of production for corn in northwestern Parana is estimated at R$ 1,900 per hectare leaving margin of R$ 1,500 per hectare or US$370 per acre.

Farmers in Parana reduced their full season corn acreage by 18% in 2010/11, but with continued strong corn prices, they may increase their full season corn acreage in 2011/12. The livestock industry in southern Brazil needs corn and the farmers realize the benefits of rotating some of their continuous soybeans to corn.