Jul 15, 2014
Brazilian Farmers still Plan on Increasing their Soybean Acreage
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Even with declining soybean prices, Brazilian farmers are still planning to maintain or increase their soybean acreage in 2014/15, but the picture is not as optimistic for corn. I think the 2014/15 soybean acreage in Brazil in increase 2-3-4% while the corn acreage will decline by an equal amount or more. In many areas of Parana and Mato Grosso farmers no longer view full-season corn as being competitive compared to soybeans, so they have switched nearly all their corn production to the safrinha crop. Safrinha corn production is not a necessity for Brazilian farmers, whereas soybean production is a necessity in order to stay in business.
Farmers in Brazil have either purchased all their needed inputs for their soybean production or are in the process of buying it, so they are locking in their soybean acreage. For the safrinha corn crop which will be planted next January and February, there is still plenty of time to purchase inputs, but there is currently little enthusiasm for the second crop of corn.
In western Parana for example, a breakeven price for corn might be in the range of R$ 22 per sack (US$ 4.50 per bushel), but the current price of corn is R$ 18 per sack (US$ 3.70 per bushel). The situation is better for soybeans. The breakeven for soybeans is approximately R$ 60.00 per sack (US$ 12.40 per bushel) and the current market price is about R$ 57.00 per sack (US$ 11.75 per bushel).
According to the Mato Grosso Institute of Agricultural Economics (Imea), the average price for corn in Mato Grosso is now R$ 11.32 per sack or approximately US$ 2.33 per bushel. These prices are already below the minimum price guaranteed by the government which is R$ 13.56 per sack or approximately US$ 2.80 per bushel. Additionally, these prices are significantly below the cost of production in the state which is estimated in the range of US$ 3.00 to US$ 3.50 a bushel. (Note: I view all these cost of production figures in Brazil with a heavy dose of skepticism.)
In all the safrinha corn producing regions of Brazil the farmers are already petitioning the federal government to start setting up a new Prepo Program where the government makes up the difference in corn prices between the market price and the guaranteed minimum price. The big question this year though is if the federal government will have the resources to conduct a program as big as the one they did in 2013. The government has still not made all the Prepo payments from 2013 and many are wondering if they have adequate resources to make good on their commitments.
In Mato Grosso the expanded soybean acreage will come from the conversion of degraded pastures to row crop production. Imea is expecting the soybean acreage in Mato Grosso to increase from 8.2 million hectares in 2013/14 to 8.6 million hectares in 2014/15.