Mar 04, 2010
Current Soybean Prices Are Below The Cost of Production In Many Regions Of Mato Grosso
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Even though Brazilian soybean farmers are going to produce a record soybean crop in 2009-10, it is still unclear if they are going to make any money on their crop. According to the Association of Soybean and Corn Producers in Mato Grosso, the cost of producing the crop this year is 20% higher than what was anticipated at the start of the growing season. The principal reasons for the increased cost include: increased applications of fungicides to control soybean rust, an increase in the minimum salaries paid to farm workers, a weaker dollar compared to the Brazilian real, and increased fuel costs.
According to the Mato Grosso Institute of Agricultural Economics, it was anticipated that the average cost of growing soybeans in the state would be R$ 1,300.00 per hectare. In reality, the cost increased to R$ 1,500.00 or more in many regions. The principal reason for the increase was the necessity to combat soybean rust with additional fungicide applications. For the last two growing seasons, many soybean fields in Mato Grosso received one or two applications of fungicides. This growing season, those same fields may have received up to 3 or 4 applications.
Another constant concern for Brazilian soybean farmers is the currency exchange rate. When Brazilian farmers were planning their 2009-10 crop, the Brazilian real was trading at 2.10:1 compared to the dollar. Currently as they are harvesting their crop, it is trading at 1.78:1. As the Brazilian currency gets stronger, Brazilian farmers receive less for their soybeans.
Combined with increased costs is the fact that soybean prices are 25-30% lower than last year, it is going to be difficult for many soybean farmers in Mato Grosso to turn a profit on their 2009-10 soybean production. In Sorriso, the largest soybean producing municipality in Brazil, a sack of soybeans is currently selling for R$ 25 compared to an average of R$ 33.50 last year. In Sapezal in western Mato Grosso, soybeans are selling for R$ 27.50 compared to R$ 34.60 last year. The situation is similar all across Brazil, not just in Mato Grosso.
The cost of producing soybeans in Campo Verde is estimated at R$ 1,725.00 per hectare, in Sapezal it is R$ 1,606.00 per hectare, and in Sorriso it is R$ 1,575.00 per hectare. If the average yield in these locations is 50 sacks per hectare, then the average cost of production per sack is R$ 34.50, R$ 32.12, and R$ 31.50 respectively. Unfortunately, all the current prices are below the cost of production based on a yield of 50 sacks per hectare. The only way soybean farmers in Mato Grosso are going to make a profit this year is if the achieved higher than average yields or lower than average costs.