September 26, 2015

Producing Soy and Corn in Brazil Costs More due to Weak Currency

Farmers in Mato Grosso have purchased 91% of the inputs needed to produce their 2015/16 soybean crop. According to the Mato Grosso Institute of Agricultural Economics (Imea), the cost of producing the soybeans increased 18% compared to last year and Imea estimates that it will cost R$ 2,920 per hectare this growing season.

The main reason for the big increase in production costs is because 70% of Brazil's fertilizers and most of the agricultural chemicals are imported and the weakening of the Brazilian currency has made those imports more expensive. According to Imea, during the time when the inputs were purchased, the exchange rate between the Brazilian real and the U.S. dollar averaged 2.92 to 1. The current exchange rate is approximately 4 reals per dollar.

While their costs have increased significantly this growing season, Brazilian farmers are very worried about their 2016/17 crop. At the rate that the Brazilian currency is devaluating, the crop that farmers will plant a year from now could end up being significantly more expensive than the current crop.