Jun 01, 2017

Low Grain Prices Challenge Brazilian Farmers

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

The Mato Grosso Institute of Agricultural Economics (Imea) is estimating that the cost of producing corn in 2017/18 will be R$ 2,580 per hectare or approximately $326 per acre. This is down from last year's estimate of R$ 2,718 per hectare (approximately $343 per acre).

If the price of corn next year in Mato Grosso is R$ 18.05 per sack (approximately $2.56 per bushel), a farmer would need to produce 120 sacks per hectare (110 bu/ac) just to break even. The current yield estimate for the 2016/17 corn crop in Mato Grosso is 88 bu/ac. The average price of corn in the state is R$ 17.45 per sack ($2.47 per bushel) and it is expected to decline as the safrinha corn harvest gets underway.

According to Scot Consultoria, in the region of Sorriso in central Mato Grosso, the price of corn is even lower at R$ 13.20 per sack or approximately $1.93 per bushel. Compared to last year, the current price of corn in Sorriso is 63.8% lower than last year.

If corn prices remain at their current level until next year, it will be difficult for farmers to make any money growing corn in Mato Grosso, which is the largest corn producing state in Brazil.

The situation in the state of Mato Grosso do Sul does not look any better. Farmers in Mato Grosso do Sul spent on average R$ 2,000 per hectare to produce their 2016/17 safrinha corn (approximately $261 per acre) and they are expecting to receive R$ 1,800 per hectare (approximately $235 per acre). For soybeans, their cost was R$ 3,000 per hectare (approximately $391 per acre) and their income was R$ 3,100 per hectare (approximately $404 per acre). Therefore, farmers made a small profit on their soybeans this year and they will lose money on their corn production.

Due to very challenging prices, Brazilian farmers are expected to keep their 2017/18 soybean acreage unchanged compared to this year. During the 2016/17 growing season, they increased their soybean acreage 1.8% to 33.85 million hectares (83.6 million acres).

They are also expected to reduce their costs by economizing on inputs, especially fertilizers. As a result, the 2017/18 Brazilian soybean production is expected to be lower than the record-large production in 2016/17 estimated at 111-113 million tons.