Oct 20, 2016

Brazilian Farmers have Sold 27% of Their Soy vs. 48% Last Year

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

Brazilian farmers are always looking for opportunities to lock in profits on their soybean production, but those opportunities have been fewer this year compared to last year. As a result, they have been slow to forward contract their anticipated 2016/17 soybean crop in the hope of improved prices going forward. According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers in Mato Grosso have forward contracted 27% of their anticipated 2016/17 soybean production compared to 48% last year at this time.

The current soybean price in Mato Grosso is in the range of R$ 60 to R$ 65 per sack (approximately $8.50 to $9.25 per bushel). These prices are essentially the same as the cost of production and they are not expected to change very much in the near future unless there is a weather scare in South America.

The Soybean and Corn Producers Association of Mato Grosso (Aprosoja/MT) estimates that the cost of production in the state is record high at R$ 3,188 per hectare (approximately $400 per acre), which is 7.7% more than last year and 38% more than three years ago. In order to generate a profit, producers in the state must at least achieve an average yield of 50 sacks per hectare or 43.5 bu/ac. If a producer sold his soybeans for an average of R$ 63 per sack and he achieved an average yield of 50 sacks per hectare, his gross income would be R$ 3,150 per hectare, which is essentially the same as the cost of production at R$ 3,188 per hectare.

Additional forward contracting will be slow as farmers wait for improved prices. Farmers in the state had the opportunity several months ago to forward contract their soybeans at R$ 70 to R$ 80 per sack ($9.95 to $11.35 per bushel), but those opportunities faded as soybean prices declined in the face of a record large soybean crop in the United States.

Aprosoja/MT is advising its members that the margin of error this year is going to be very small and producers must achieve at least an average soybean yield if they hope to break even. They are recommending that farmers prioritize their first crop of soybeans because that is their main crop. If they end up planting a second crop of corn, that is a bonus, but they should not skimp on their soybeans or plant the soybeans earlier than conditions permit just to have a chance of recuperating their loses with a second crop of corn.

Profitable soybean production will be harder to achieve this year in eastern Mato Grosso because this is a relatively new area for row crop production and more investments in fertilizers and technology will be needed to achieve acceptable yields.

Imea is estimating that the 2016/17 soybean production in Mato Grosso will be 29.8 million tons or 7.5% more than in 2015/16. The average yield in the state is expected to be in the range of 50 to 53 sacks per hectare or 43.5 to 46 bu/ac with a yield of 50 sacks per hectare needed to break even.