September 22, 2016

Early Planting of the 2016/17 Soybean Crop Underway in Brazil

Brazilian farmers were allowed to start planting their 2016/17 soybean crop late last week and many farmers took advantage of the good conditions and started planting immediately. Mato Grosso is the largest soybean producing state in Brazil and surprising rains over the weekend improved the planting conditions in the state. Most of the rainfall, fell in the central and western parts of the state with the eastern and southern regions receiving little or no rain. The farmers in central Mato Grosso are actively planting their soybeans while the farmers in eastern and southern Mato Grosso continue to wait for adequate soil moisture to start planting.

The municipality of Sorriso, which is located in central Mato Grosso, is the largest soybean producing municipality in Brazil and farmers in the region are now actively planting their soybeans. This is also the largest safrinha corn producing municipality in Brazil as well, so an early start for soybean planting bodes well for planting the safrinha corn crop after the soybeans are harvested.

The state of Parana is the second largest soybean producing state in Brazil and the Department of Rural Economics in Parana (Deral) reported that 3% of the soybeans in the state had been planted by earlier this week and that 34% of the full-season corn had been planted.

The cost of producing the 2016/17 Brazilian soybean crop in has increased to an all-time high. In northern Mato Grosso for example, many farmers have indicated that the cost of some of their inputs have increased 25% compared to a year earlier. Farmers in Mato Grosso like to relate their cost of production to how many sacks of soybeans are needed to cover their costs. This is a convenient way of accounting for changes in the currency exchange rate between the Brazilian real and the U.S. dollar, which impacts grain prices and the cost of inputs.

For the 2015/16 crop, a typical farmer in northern Mato Grosso may have needed to sell 36 sacks of soybeans (31 bushels) at a price of R$ 52 per sack (approximately $7.40 per bushel) to cover the cost of producing the crop from planting through harvest. For the 2016/17 crop, the same farmer will need to sell 40 sacks of soybeans (35 bushels) at a price of R$ 70 per sack (approximately $9.60 per bushel) to cover the same costs.

The higher cost of production is a big concern for farmers since many lost money on last year's crop and credit is very tight this year and interest rates are higher than last year. If they qualify for government subsidized production loans, the interest rates will be 8-12% compared to last year when they were 6-8%. The prime rate in Brazil is 14.25%, so if a farmer was forced to go the public banking sector for a production loan, the interest rates will probably be over 20%.