November 4, 2011

Pastures Conversion Used to Increase Soy Production in Brazil

A significant portion of the expansion of soybean and sugarcane acreage in Brazil is the result of farmers and ranchers converting some of their pastureland into row crop production. After a growing season where many farmers turned a profit of R$ 500 per hectare by growing soybeans, they see more opportunities in crop production than in cattle ranching. This has been particularly true in eastern Mato Grosso where a cattle ranching still predominates, but crop production is increasing. As a result, the soybean acreage in Mato Grosso is expected to increase 380,000 hectares this growing season to 6.78 million hectares with many of those additional acres being former areas of pastures.

In recent years cattle ranchers have complained about the lack of slaughter houses in the region and the low prices being offered by the few meat packers that operate there. Cattle ranchers have also been hurt by two prolonged dry season in a row that resulted in excessive weight loss by their cattle and high mortality rates.

Converting pastureland to row crop production requires significant up-front expenditures. If the farmer is converting his own land from pasture to row crops the estimated cost is approximately R$ 1,700 per hectare (US$ 400 per acre). One of the biggest expenditures is the application of approximately six tons of agricultural limestone per hectare, which is needed to raise the soil pH to the needed level for soybean production. Fertilizers need to be applied as well to increase the levels of phosphorus and potassium. Phosphorus and potassium need to be applied on an annual basis to maintain the fertility and limestone needs to be reapplied ever 3 or 4 years to maintain the pH.

If a farmers wants to expand his operation by purchasing nearby pastureland, the going rate is in the range of R$ 4,000 to R$ 6,000 per hectare (US$ 940 to 1,400 per acre).

In newly opened areas, famers traditionally planted one or two crops of rain-fed rice before they started to plant their first crop of soybeans. Rice was the preferred crop to plant first because it is more tolerant of low soil fertility and the combine header could be a foot or so above the ground during harvest thus avoiding any roots that may be remaining. Due to the low price for rice and the high price for soybeans, that practice is changing and farmers are now planting soybeans during the first year of conversion. Since they are converting pasture instead of native vegetation, the problem with roots is not as bad which allows the combine header to be near the surfaced to harvest the soybeans.

Even with the conversion of pastureland to row crops, the state of Mato Grosso still has the largest cattle heard in Brazil at over 28 million head and it is expected to reach 30 million next year. The vast majority of cattle in Mato Grosso are entirely grass fed, but semi-confinement is gaining in popularity as a way for individual ranchers to maintain cattle numbers even though they may be losing some of their pasture.