May 20, 2020

Weaker Currency Results in Higher Cost of Production in Brazil

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

While the weakening of the Brazilian currency compared to the U.S. dollar has helped to propel domestic corn prices in Brazil to record high levels, it has also increased the price of any imported items needed to produce the next corn crop.

During the month of April, the U.S. dollar increased 4.3% in value compared to the Brazilian currency. As a result, the prices for imported micronutrients increased 4.6% in April and imported fungicides increased 10.6%. Operational costs increased 2.9% in April due in part to higher land rents.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the cost of producing the 2020/21 corn crop in Mato Grosso increased 2.9% during the month of April. Imea now estimates that the cost of production for the 2020/21 corn crop in the state will be R$ 2,565 per hectare. This equates to approximately $207 per acre and $2.07 per bushel if you use an exchange rate of 5 Brazilian reals per dollar and an average yield of 100 bu/ac.

Imea calculates that the break-even price for corn in Mato Grosso for the 2020/21 growing season needs to be about R$ 20.29 per sack or approximately $ 1.85 per bushel. The current price of corn in the state is R$ 39.10 per sack or approximately $ 3.55 per bushel.