September 12, 2013

Cost of Producing Soybeans Increases in Mato Grosso

The cost of producing soybeans in Mato Grosso during the 2013/14 growing season is expected to increase 27% compared to 2012/13. The cost of seed, fertilizers, chemicals, labor, and transportation are all expected to increase significantly during the upcoming growing season. According to the Mato Grosso Institute of Agricultural Economics (Imea), the total cost of producing a hectare of soybeans in Mato Grosso, which is the largest producer in Brazil, is estimated at R$ 2,430 (US$ 427 per acre or US$ 9.80 per bushel assuming a yield of 43.5 bu/ac), which is up 27% compared to the cost of R$ 1,900 during the 2012/13 growing season.

The increased costs are due in large part to a weakening Brazilian currency that makes imports such as fertilizers and chemicals more expensive. These costs calculations should be viewed with caution because they are highly dependent on the exchange rate used to do the calculation and they can vary widely depending on the currency fluctuations. When Brazilian farmers purchased their 2012/13 inputs, the currency was trading at approximately 1.85 reals per dollar. The rate peaked late last month at 2.45 per dollar and it now stands at 2.28 per dollar. Therefore, these cost calculations are highly dependent on the exchange rate.

The package of seed, fertilizer, and chemicals this growing season will represent a cost of R$ 1,230 per hectare compared to R$ 980 last year. The average cost of seed in the state is expected to increase the most percentage wise going from R$ 106 per hectare to R$ 148. Fertilizer costs are expected to rise 24% going from R$ 518 per hectare to R$ 644. Chemical costs are expected to rise 28% with labor costs up 45% and transportation costs up 18%.

While the cost of producing soybeans is increasing, the weaker currency also means that farmers are seeing a higher price for their soybeans as well. Margins for producers will be highly dependent on how astute they were in purchasing their inputs and forward selling their anticipated production. If they purchased their inputs before the currency started to weaken in May and if they forward sold some of their crop when the currency was at its weakest at the end of August, they should be able to realize a good margin for their 2013/14 soybean production.