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September 17, 2015

Full-Season Corn Acreage in Rio Grande do Sul lowest in 45 Years

Farmers in Rio Grande do Sul in southern Brazil continue to reduce their full-season corn acreage in favor of additional soybean production. Emater is estimating that the corn acreage in the state will decline 9.7% in 2015/16 to the lowest level in 45 years, which is as far back as records are kept.

Farmers in the state tried to start planting their corn as early as possible this year in order to allow enough time to plant a second crop of soybeans in January. As of late last week, farmers had planted 32% of their corn compared to 20% last year at this time. Freezing temperatures over this past weekend killed a lot of the corn that was planted in August. While some of the corn will be replanted, some farmers will also shift those corn hectares to additional soybean production.

The main reason why farmers are plating less corn and more soybeans is because of the price ratio between the two crops. For corn and soybeans to be equally as profitable in the state, the ratio between the two crops should not be more than 1.8 to 1 due to the relatively lower yields for corn. Currently, the price ratio is nearly 3 to 1 in favor of soybeans.

At the current ratio, in order for corn to be competitive, the corn crop would need to yield three times more than soybeans, which is extremely unlikely. Soybean yields in the state were outstanding last year, setting all-time record highs. For example, if last year's soybean yields were 70 sacks per hectare (4,200 kg/ha or 60.9 bu/ac), the corn yield would need to be 210 sacks per hectare (12,600 kg/ha or 194 bu/ac) in order for the corn crop to equal the profitability of soybeans. In reality, the corn yield in the state last year was 120 sacks per hectare (7,200 kg/ha or 110 bu/ac), far short of what is needed for corn to even come close to soybeans.

Soybeans also are a lower cost crop to produce and there is less risk associated with soybean production. The cost of producing corn in the state is approximately R$ 2,200 per hectare compared to R$ 1,400 per hectare for soybeans. Soybeans are also less risky because they require less rainfall during the growing season.

Even though the corn acreage is declining, full-season corn will always be grown in the state because most of the corn is now being grown by small family farmers who use the corn as feed rations for their chickens, swine and cattle. The state is also a major milk producing state and a lot of the corn is used as silage for dairy cattle.

Farmers and agronomists all agree that growing a monocrop of soybeans year after year is not sustainable for the long term. Growing only soybeans leads to reduced organic matter in the soil, increased pest and disease pressures and eventually a plateauing of soybean yields. While it may not be stainable long term, the short term economics dictates that farmers grow more soybeans.