Sep 14, 2010
Lower Profit Margins for Soy in Mato Grosso Compared to Illinois
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Soybean farmers in Mato Grosso, Brazil can produce soybeans cheaper than the farmers in Illinois, but they have a smaller profit margin due to the high cost of transporting their soybeans out of the state. That is the conclusion of the Mato Grosso Institute of Agricultural Economics (Imea) when they compared the cost of producing and transporting soybeans in Illinois and in Mato Grosso. Mato Grosso soybean farmers spent approximately 12% less to produce their soybeans as compared to farmers in Illinois, but they spent 85% more to transport the soybeans to port facilities.
Soybean farmers in Mato Grosso have the advantage when it comes to input costs such as seeds, chemicals, fertilizers, mechanical operations, labor cost, taxes, and transporting the soybeans inside the farm. During the 2008/09 growing season, Imea estimates that the average cost of production for soybeans in Mato Grosso was US$ 1,072 per hectare (US$ 245 per acre) compared to an average of US$ 1,222 per hectare in Illinois (US$ 280 per acre). The soybean yields in both states are very comparable during most years.
Mato Grosso farmers are at a distinct disadvantage once the soybeans leave the farm. In Mato Grosso, it costs approximately US$ 120 per ton to move soybeans from Sorriso, which is located in central Mato Grosso, to the Port of Paranagua in southern Brazil. For the farmers in Illinois, it costs approximately US$ 18 per ton to move the soybeans to the Port of New Orleans. The farmers in Mato Grosso can spend between US$ 3.00 to 3.50 per bushel on transportation costs while the farmers in Illinois spend approximately US$ 0.50 per bushel on transportation.
Reducing transportation costs is the quickest way farmers in central Brazil can improve their margins, but progress on this front has been very slow.