Aug 17, 2018
Soybeans making Inroads in Sugarcane Production in Sao Paulo
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Soybean acreage in Brazil continues to move higher year after year with most of the increased acreage coming from switching full-season corn to soybean production, converting degraded pastures to row crop production, clearing of new land for agriculture, and one other unusual source - switching out of sugarcane production into soybeans in the state of Sao Paulo.
The state of Sao Paulo is responsible for more than half of Brazil's sugarcane production, but the sugar/ethanol sector has run into hard times in recent years. At one point, Brazil had more than 400 sugar/ethanol mills, but dozens of the older, smaller, and less efficient mills have closed in recent years opening the door for a more profitable crop - soybeans.
Over the last eight years, the soybean acreage in the state of Sao Paulo has gone from 500,000 hectares to nearly 1,000,000 hectares. The increase acreage came from three sources, the conversion of pastures or other crops to soybeans, the abandonment of sugarcane in favor of soybeans and the inclusion of soybeans in the process of renovating sugarcane fields.
Sugarcane production can only exist if there is a nearby mill to process the cane. If the mill closes, the nearby fields will probably no longer be planted to sugarcane because it is very difficult to harvest and transport the sugarcane long distances to another mill. Many of the mills rent land from surrounding farmers to grow their sugarcane and the mill does everything associated with producing the cane from planting to harvesting. If the mill closes its doors, the landowner needs to look for another crop to grow and that is where soybeans fit in.
According to a recent article in the magazine Portos e Navios (Ports and Ships), it's all about margins. The president of the Soybean and Corn Producers Association of Sao Paulo (Aprosoja-SP), indicated that the average income from a field of soybeans during the 2017/18 growing season was R$ 3,992 per hectare, which allowed the farmer to make a profit that was approximately 40% above the long term average
The Sugarcane Producer's Council of the Sugar and Ethanol Producers of Sao Paulo (Consecana), the Union of sugarcane Industries (Unica), and the Sugarcane Planters Organization estimate that the cost of production per hectare of sugarcane in Sao Paulo during the 2016/17 growing season was R$ 5,887 and that was 15% more than the receipts from selling the sugarcane. These same organizations feel sugarcane producers will lose even more money during the 2017/18 season.
Therefore, when a mill closes, those sugarcane fields can migrate to soybeans which are cheaper to grow, produce more profits, can be stored for future sale, and can be sold anytime and anyplace. Soybeans do not depend on a specific buyer at a specific location.
The other way soybean acreage is increasing in Sao Paulo is by being introduced into the sugarcane renovation process. Sugarcane fields need to be replanted every 5-6 years to maintain their productivity. Many sugarcane producers are now planting one or two crops of soybeans before the sugarcane is replanted. There are both financial and agronomic advantages for doing this. First, the soybeans can generate a profit and cash flow, wheras newly planted sugarcane does not produce any income for the first year. Secondly, soybeans fix their own nitrogen, some of which remains in the soil for the following sugarcane crop. Additionally, any fertilizers applied to soybeans will improve the soil fertility for the following sugarcane.
Soybean acreage in Sao Paulo will continue to increase because producers have been reporting very positive results with this practice and they are now routinely using soybeans in their sugarcane renovations. Additionally, more sugar mills are expected to close in 2018, which will open up more sugarcane fields to be converted to soybean production.