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October 16, 2013

Summary for Costs of Producing Soybeans and Corn in Brazil

Several things become very apparent when you examine these cost of production figures. First and foremost is the fact that Mato Grosso is one of the most expensive regions in Brazil to grow soybeans and that is due mainly to the cost of transporting the imported fertilizers and chemicals from Brazil's southern ports to the interior of the country.

The costs listed are only production costs and in addition to the cost of producing the crop, it costs in the range of US$ 2.50 to US$ 3.25 per bushel to transport the soybeans from Mato Grosso to ports in southern Brazil. In the state of Parana, the cost of transporting the soybeans to the Port of Paranagua averages approximately US$ 0.90 per bushel.

These estimates should not be taken as "gospel" because of the variability in the exchange rate at the time the costs were calculated. The Brazilian real was getting weaker during the summer months which made imported fertilizers appear more expensive and fertilizers are a major component of producing crops in Brazil. If fertilizers get too expensive in Brazil, soybean producers have the option of reducing fertilizer applications as a way to reduce costs. So these costs assume farmers would apply their normal amount of fertilizer in 2013/14.

Virtually all the soybeans produced in Brazil are grown by commercial grain farmers, but a significant portion of the corn in Brazil is grown by small-scale subsistence farmers for their small livestock operations. The corn yields achieved by these subsidence farmers is generally very low and that is one of the reasons why the cost of growing corn appears to be much higher in Brazil compared to the U.S.

Lastly, there appears to be some large discrepancies in these numbers even though the locations are relatively close together. For example, there is nearly a dollar difference per bushel for soybean production in Londrina and Campo Mourao in Parana, yet the two locations are relatively close together. My guess is that land costs are more expensive in Londrina due to a more urban environment and competition for land from sugarcane production, thus a higher cost of production when the fixed costs are added to the variable costs.

The bottom line is that these estimates are broad guides to the cost of producing soybeans and corn in Brazil and they can vary significantly region by region and even within a region.