October 21, 2011

Cost of Producing Soybeans and Corn in Brazil up 20% in 2011/12

Two new studies recently released by state governments in Brazil indicate that the cost of producing soybeans and corn in Brazil in 2011/12 is 20% higher than in 2010/11. The cost of inputs, especially fertilizers, which accompanied grain prices higher earlier this year are the principal cause of the higher production costs. Additionally, the weaker Brazilian currency has also contributed to higher fertilizer prices since over 60% of the fertilizers used in Brazil are imported.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the average production cost per hectare of soybeans in the municipality of Sorriso is R$ 1,632 compared to R$ 1,424 last growing season. The increased cost of production is about equivalent to the increased prices being paid for soybeans, so the farmers are about at a break-even point as far as margins are concerned compared to the 2010/11 growing season.

The early rains have been good in Mato Grosso and the soybean crop is already more than 25% planted. Farmers are anxious to get their soybean planted so that they will be able to plant their second crop of corn or cotton in a timely fashion in January or February.

The extension service in the state of Parana is estimating that the cost of production for soybeans and corn will increase 15% to 20% in 2011/12. For no-till soybean production, they are estimating that the cost will be R$ 1,700 per hectare and for conventional tillage, it will be R$ 1,900 per hectare.

The large cooperatives in Parana try to get their members to purchases their inputs during the month of June, and during this past June, approximately 70% of the needed inputs were purchased. The farmers who purchased their fertilizers during that period were fortunate, because the Brazilian currency has weakened since then and as a result, fertilizer prices have increased about 20% since early August. If a farmer in Brazil waited until the last minute to purchase his inputs that was the wrong decision this year.