Jul 10, 2024

Brazil Farmers May Forgo Renting Marginal Land to Grow Soy

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

For the 2024/25 growing season, farmers in Brazil may encounter a situation they have not had to confront for over 17 years - low prices and high cost of production making renting marginal land to grow soybeans unprofitable.

The last time the soybean acreage declined in Brazil year-to-year was during the 2006/07 growing season. The reason for the decline was low yields in 2005/06 due to the ravages of Asian soybean rust. In 2005/06, farmers reduced their acreage due to low prices and the high cost of fungicides needed to control soybean rust and the uncertainty if the control measures would work. Since then, there have been 17 straight years of increasing soybean acreage in Brazil.

According to Conab, the soybean acreage in Brazil increased from 21.38 million hectares in 2003/04 (52.8 million acres) to 45.98 million in 2023/24 (113.5 million acres) or an increase of 115%.

This current dilemma could impact how much land farmers are willing to rent to grow soybeans especially in marginal areas of northeastern Brazil or for degraded pastures being converted to row crop production. In both situations, soybean yields are generally low for the first few years after conversion due to lower soil fertility. It takes a few years before the soil fertility can be improved enough to support higher soybean yields.

In new areas of the agricultural frontier in northeastern Brazil, rents are in the range of 14-17 sacks of soybeans per hectare or 12.5 to 15.1 bu/ac. In more established areas where the rainfall is higher and yields are better, the rent can be in the range of 15-25 sacks per hectare or 13.4 to 22.0 bu/ac.

Using a spot price of R$ 120 per sack (approximately $9.00 per bushel) and an exchange rate of 5.4 reals per dollar, 14 to 17 sacks per hectare rent would equate to approximately $125 to $150 per acre. A rent of 25 sacks per hectare would equate to approximately $225 per acre.

Given the current situation, there are reports in Brazil that farmers are opting not to renew their rental agreements to grow soybeans in marginal areas with lower productivity. With lower yield potential and higher costs to produce soybeans in marginal areas, it could be very difficult to turn a profit if you also must pay rent.

The Brazil soybean acreage is still expected to increase in 2024/25, but at a slower pace compared to the last several years.