Jul 23, 2010
Brazilian Farmers Continue to be Slow in Purchasing Inputs
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Even though soybean prices have strengthened over the last month, it has not been enough to excite soybean farmers in Brazil who continue to be slow in purchasing their inputs for the 2010/11 crop. One of the reasons for the lack of enthusiasm is the currency exchange rate. Even though the March soybean price on the Chicago Broad of Trade increased 6.7% over the past 12 months, the Brazilian currency gained 6.8% over the same period. A stronger Brazilian currency makes some of the inputs cheaper, but it also means that Brazilian farmers put less money in their pockets every time they sell a sack of soybeans. Anytime the Brazilian currency is trading at 1.8 to the dollar or less, farmers view this as very negative.
The Mato Grosso Institute of Agricultural Economics (Imea) estimates that 60% of the farmers in Mato Grosso have purchased the necessary inputs for the 2010/11 crop and that 10% of the anticipated production has already been commercialized. The majority of these forward sales were to grain companies in exchange for needed fertilizers. Both of these numbers are a little below last year's levels
The farmers in Mato Grosso are the first to plant their soybeans so they need to purchase their inputs first as well. Input purchases in the rest of Brazil are not as advanced as they are in Mato Grosso and most farmers are waiting for improved soybean prices before they forward contract their anticipated production.
The cost of producing the crop and the margins are expected to go down for soybean producers in 2010/11. Agroconsult estimates that the cost of production for soybeans will go down between 5% and 6% depending on the region of the country. At the same time, soybean margins are expected to decline between 18% and 40%. They expect corn margins to decline 12%.
Imea estimates that the multinational grain companies are going to finance 25% of the production loans in Mato Grosso in 2010/11 compared to 35% of the production loans in 2009/11. Part of the lost credit will be made up by increased lending by chemical and seed suppliers who collectively will supply approximately 20% of the needed credit compared to 14% for the last growing season. Banks, both federal and private, are expected to supply 18% of the credit. The remaining 37% of the resources are expected from the farmers themselves, which is an increase from 34% last year.
Imea estimates that the multinational grain companies are going to finance 25% of the production loans in Mato Grosso in 2010/11 compared to 35% of the production loans in 2009/11. Part of the lost credit will be made up by increased lending by chemical and seed suppliers who collectively will supply approximately 20% of the needed credit compared to 14% for the last growing season. Banks, both federal and private, are expected to supply 18% of the credit. The remaining 37% of the resources are expected from the farmers themselves, which is an increase from 34% last year.