Nov 30, 2009
Declining Fertilizer Prices Lowers Cost Of Producing Soybeans In Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Brazilian farmers have mixed feelings about their 2009-10 crops. While they lament the fact that prices are too low and the Brazilian currency is too strong, they are expecting good yields if the weather remains supportive and their cost of production is lower this year compared to last year. Averaged nationwide, the cost of producing soybeans is down 14.6% compared to last year and the cost of producing corn is down 20.5%. The main reason for the decline is the drop in fertilizer prices from their peak in 2008. Since corn production requires more fertilizers than soybeans, the savings for corn production is greater than it is for soybean production.
The amount of savings though was dependant on the timing of the fertilizer purchases. For this growing season, the longer the fertilizer purchase was delayed, the greater the savings realized by the farmer. The story is similar all across Brazil, fertilizer prices continued to decline right up until planting time. While fertilizer prices declined in 2009, the cost of other inputs such as seed and chemicals increased in 2009, but since fertilizers are such a big part of the cost of growing crops in Brazil, the decline in the fertilizer price resulted in an overall decline in the cost of production.
In Nova Mutum in central Mato Grosso, if a farmer purchased their inputs early in 2009 (January) it cost the equivalent of 28 sacks of soybeans per hectare to purchase the inputs for one hectare of soybean production in 2009-10. If the farmer had waited until July to make the same purchase, it would have cost 25 sacks of soybeans.
The story is the same in Parana. If the fertilizer had been purchased in February, there would have been a savings of 30% compared to the prior year. If the purchases had been put off until July, the savings would have been nearly 50%. In southwestern Parana, fertilizer with a formulation of 11-28-15 (used for soybean production) sold for R$ 110 per sack in 2008. The same fertilizer sold R$ 66 per sack early in 2009 and it is now selling for R$ 40 per sack.
In northeastern Brazil, potassium chlorate sold for R$ 1,800 per ton in 2009. In July 2009, it sold for R$ 1,580 per ton and now it is selling for R$ 1,000 per ton.
Reduced fertilizer prices are particularly important for farmers in Mato Grosso where the native fertility is low and more fertilizers are needed to grow soybeans. When fertilizer prices were high such as in 2008, Mato Grosso was probably the most expensive place in the world to grow soybeans. In 2008, the cost of the fertilizer used to grow soybeans in Argentina averaged about US$ 38 per hectare. In the United States it averaged US$ 61 per hectare and in Mato Grosso it averaged US$ 80-90 per hectare.
The average cost of producing soybeans in Mato Grosso has declined from R$ 1,700 per hectare in 2008-09 to R$ 1,400 per hectare in 2009-10. If you use an average statewide yield of 45 bu/ac and an exchange rate of 1.7 Brazilian reais per U.S. dollar, the cost per bushel went from US$ 8.88 in 2008-09 to US$ 7.73 in 2009-10.