Jan 05, 2009
Record Soy Production Expected In Mato Grosso, But Old Problems Persist
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Farmers in Mato Grosso are confident that they will harvest a record soybean crop in 2010. Even with that good news, they are still confronted by some of the same problems that have perplexed them for many years - a strong currency, a lack of infrastructure development, the high cost of transportation, and a lack of adequate storage space.
According to the Agricultural Economic Institute of Mato Grosso (Imea) when the farmers of the state were planting their 2008-09 soybean crop the average exchange rate between the Brazilian real and the U.S. dollar was 2.17:1. During the 2009-10 planting season it was 1.73:1. The strengthening Brazilian currency has taken away much of the potential profits for the soybean growers. The cost of producing soybeans in Mato Grosso is approximately R$ 30.00 for each sack (60 kilograms). The current price of soybeans in the state is hovering around R$ 30 per sack. For the last 4-5 years, the farmers have planted their soybeans when the dollar was stronger and harvested their soybeans when the dollar was weaker, which has had a severe impact on their profitability. Most farmers would feel much more comfortable if the exchange rate was at least 2.0:1. The one salvation for the soybean farmers in the state is the fact that the yields in 2009-10 should be very good.
With a potential for a record soybean crop, there are already indications that transportation costs will be higher than ever. Trucking companies in Brazil have been pressing for higher freight rates to compensate for increased fuel and maintenance costs. The Ferronorte Railroad has helped to lower transportation costs a little, but the rail line still transports only a small percentage of the soybeans produced in the state.
The perpetual problem of inadequate storage space in Brazil may become an even bigger concern in 2010. Soybean farmers in central Brazil have been pleading with the federal government to accelerate their purchases of corn left over from the 2009 safrinha corn crop. The corn is still occupying valuable storage space that will be needed for the soybean crop. Domestic corn prices are very low and farmers are unwilling to sell the crop at a loss, so their only other alternative is to sell it to the government at a guaranteed minimum price, but the government has been very slow to purchase the corn. If the government does not accelerate their purchased of the corn in the very near future, a lack of storage space could become a very big concern for soybean farmers in central Brazil.