September 28, 2012

Farmers Opt for More Soy and Less Sugarcane in Northern Parana

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

Farmers in Brazil are so enthusiastic about increasing their soybean production that soybeans are taking away acreage of full-season corn, cotton, dry beans, rice, horticultural crops, pastureland, and now even sugarcane. According to the Sugarcane Producers and Suppliers Association of Paranapanema (Canapar) in northern Parana, some of the association's 300 members are forgoing renovating their older sugarcane fields in favor of converting those fields to additional soybean and corn production. This movement away from sugarcane is not seen as a long-term trend but rather a short term phenomenon due to near record high prices for both soybeans and corn.

The 300 members of the association produce approximately 6 million tons of sugarcane on an annual basis and the president of the association, Paulo Boso, estimates that 30% the members are considering switching some of their ageing sugarcane to row crop production, at least temporarily.

After a field of sugarcane is planted, it is harvested repeatedly for five or six years before the yield potential starts to decline. After about six years of production, the yields start to decline approximately 10% per year for each year it is not replanted. Replanting a field of sugarcane is expensive because in addition to the planting expense, the producer must forgo a year of income from the field. In order to renovate their sugarcane fields, most small producers must obtain loans, but credit is tight and difficult to obtain for many smaller producers.

Soybean production is very attractive for these producers because of the quick return on investment. A soybean crop can be sold three or four months after it has been planted. Northern Parana is also an area where safrinha corn can be planted after the soybeans are harvested. So farmers could plant and harvest two highly profitable crops during the same time it would take to renovate a field of sugarcane which would not produce any income for a year.

Currently, 60% of the 2012/13 sugarcane crop in Parana has been harvested. The state is expected to harvest 45 million tons of sugarcane on the 600,000 hectares of sugarcane planted in the state. While the estimated production is 4.5% more than last year, it is still disappointing due to the fact that the sugarcane acreage increased 8% this growing season. The disappointing crop is being attributed to excessive rains during the month of July which lowered the quantity and the quality of the sugarcane.

According to the Union of Sugarcane Industries (Unica), 349 million tons of sugarcane have been harvested nationwide thus far this harvest season compared to 376 million tons during the same period last year. Heavy rainfall during the first half of the harvest season (April-July) slowed the initial harvest pace and producers have struggled to make up the difference.