October 3, 2011

Soybean Cost of Production Increases 10% in Brazil

The cost of growing soybeans in central Brazil has increased 10% in 2011/12 compared to a year ago. According to the Mato Grosso Institute of Agricultural Economics (Imea), the typical producer in Mato Grosso will spend R$ 1,655 per hectare to produce his soybeans in 2011/12. Of this total, R$ 1,504 are operational costs such as planting, harvesting, and inputs.

The principal reason for the rising costs was the increased price for inputs which rose 23% in 2011. The cost of fertilizers increased the most and fertilizers are very important for soybean production in the cerrado regions of Brazil.

In compensation for higher prices, the recent weakening of the Brazilian real compared to the U.S. dollar has been very beneficial for Brazilian farmers because with a weaker currency they put more money in their pockets every time they sell a sack of soybeans. Farmers have been very aggressive in forward selling their 2011/12 soybean production. Imea estimates that approximately 50% of the anticipated production has already been sold. This is much faster than last year when 36% had been sold by this date.

Imea estimates that soybean acreage in Mato Grosso will increase 3.4% to 6.4 million hectares. Most of the increase came as the result of conversions of pastures to soybeans. Total production for the state is estimated at 21 million tons or 2.3% more than 2010/11. Slightly lower yields are expected this growing season due to the incorporation of new lands which are generally lower yielding for the first few years of production.

Rainfall amounts have been increasing in Mato Grosso over the last two weeks and many farmers have now started to plant their 2011/12 soybean crop. Imea estimated late last week that 1% of the crop had been planted, but that number will quickly increase.