Nov 13, 2009
Brazilian Sugarcane Production Expanding Into Pastureland And Soybeans Expanding Into Corn Areas
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The question is often asked that if Brazil continues to expand its sugarcane production, will it take away land that could potentially be used to produce soybeans or corn? Generally in Brazil, sugarcane expansion is occurring primarily in areas formally used as pastureland and to a lesser extent, areas that were producing rice or edible beans. For the 2009-10 growing season, soybean expansion in Brazil is occurring in areas formally used to grow corn and to a lesser degree new lands that are being brought into production.
Last year, the four leading sugarcane-producing states in Brazil were Sao Paulo, Minas Gerais, Parana and Goias and all of these states registered increases in sugarcane production. Collectively, these four states increased their sugarcane production by 530,000 hectares last year. Sao Paulo is the leading sugarcane producing state in Brazil and its sugarcane acreage went from 3.8 million hectares in 2008 to 4.2 million hectares in 2009. The second leading sugarcane producing state in Brazil is now Minas Gerais, which surpassed Parana for the second spot.
The increase in soybean acreage in Brazil is occurring at the expense of corn acreage because of the reduced cost of producing soybeans and higher domestic prices for soybeans. Domestic corn prices have sagged in Brazil due to a lack of export demand and large carryover stocks from the 2008-09 growing season. While the cost of producing corn in Brazil has declined approximately 30% due to lower fertilizer prices in 2009, it has not declined enough to compensate for the lower prices being offered in the domestic market. When Brazilian farmers were making plans for the 2009-10 growing season, domestic corn prices were actually lower than the cost of production.
On the other hand, the cost of producing soybeans in Brazil in 2009-10 declined as much as 40% and the domestic soybean prices in Brazil are higher than on the Chicago Board of Trade. Soybean prices are strong in Brazil due to demand by local crushers hoping to secure some of the limited soybean stocks in the country. This inverse in the price will probably last until the new crop supplies become more plentiful once the harvest begins early next year.