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September 18, 2012

Cost of Producing Soybeans, Corn, and Cotton Increases in Brazil

As Brazilian farmers prepare to plant their 2012/13 crops, they are paying much more to plant their soybean, corn, and cotton crops compared to last growing season. Data provided by the Mato Grosso Institute of Agricultural Economics (Imea) indicate the law of supply and demand is working as expected. As the demand for inputs increase, so too has the price of the inputs. Brazilian farmers want to take advantage of very strong commodity prices by maximizing their crop production. In order to do that, they are increasing their purchases of inputs, thus higher prices.

For soybean producers in Mato Grosso, it is expected to cost R$ 2,170 to grow a hectare of soybeans this growing season, which is an increase of 31% compared to the cost of R$ 1,654 per hectare last growing season. Everything is costing more this year including: fertilizers, seed, chemicals, labor, transportation, storage, and land. Fertilizers are a major expense for farmers in Mato Grosso and delays in unloading imported fertilizer at the Port of Paranagua has resulted in very tight fertilizer supplies and higher prices.

The soybean acreage in Brazil is expected to increase 8% and as a result, there has been strong demand for soybean seed especially for the early maturing varieties that would be harvested in time to allow for a second crop of corn to be planted. Many of the popular varieties have been sold out for months and farmers have been forced to purchase their second or third choices.

The cost of growing corn in Mato Grosso is expected to increase 41% from R$ 1,221 per hectare in 2011/12 to R$ 1,727 per hectare in 2012/13. Very little of the corn grown in Mato Grosso is full-season corn planted at the start of the growing season. The vast majority of corn grown in the state is safrinha corn planted after the soybeans are harvested. Thus far, farmers in the state have not been aggressive in forward contacting their anticipated safrinha corn production because they are not certain if they will be able to plant the corn in a timely manner. Most farmers are waiting to see when they will be able to plant their soybeans so they can then determine when they will be able to plant their safrinha corn crop.

The safrinha corn acreage in the state is expected to increase due to the strong demand for corn and increased soybean plantings.

Cotton is the third major crop grown in Mato Grosso and the cost of growing cotton in the state is expected to increase 16% from R$ 4,607 per hectare in 2011/2 to R$ 5,364 in 2012/13. The increase in the cost of growing cotton is not as much as it is for soybeans and corn primarily because the price of cotton has not increased like it has for soybeans and corn. The cotton acreage in the state is expected to remain flat or actually decline slightly in 2012/13 as farmers opt for additional soybean acreage.