September 27, 2011

Soy Cost of Production Cheaper in Argentina Compared to Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Soybean producers in Argentina have a much lower cost of production as compared to producers in Brazil. The Argentine producers have lower costs due to a number of reasons including: more fertile soils that require less fertilizers, lower cost of inputs due to lower transportation costs, more efficient transportation system, major soybean production located much closer to the Argentine ports than in Brazil, and more efficient port operations.

One of the biggest advantages in Argentina is the fact that the majority of the soybeans in the country are grown in relatively close proximity to the major port in the country, which is the Port of Rosario. In Argentina nearly all the soybeans are grown within 500 kilometers of the port whereas in Brazil, the largest soybean producing municipality, which is Sorriso Mato Grosso, is located approximately 2,000 kilometers from the Port of Santos in southeastern Brazil.

The soybeans in Argentina travel an average distance of just 300 kilometers to reach the Port of Rosario at an average cost of US$ 20 per ton. In Brazil, it can cost as much as US$ 120 to move a ton of soybeans from Sorriso to the Port of Santos.

The port area of Rosario is also one of the largest soybean processing complexes in the world. There are 13 soybean processing facilities within 65 kilometers of Rosario with a daily combined crushing capacity of 130,000 tons. Today there are a dozen individual port facilities near Rosario whereas a decade ago there were just four port facilities. These facilities can load Panamax vessels with 65,000 tons of soybeans destined for China or Europe.

The lower cost of production in Argentina is encouraging farmers in the country to expand their operations into the northern provinces of the country such as Chaco, which lies along the border with Paraguay.

Even though the cost of producing soybeans is cheaper in Argentina, the farmers in the country must pay a 35% export tax on the soybeans they ship overseas, whereas in Brazil, there is no such tax.