Nov 25, 2014

Soybeans Gain Acreage from Sugarcane in Sao Paulo, Brazil

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

After a number of years of disappointing sugarcane yields and low prices, some farmers in Sao Paulo have decided to plant soybeans instead of renovating existing sugarcane fields. Sugarcane production in Sao Paulo, and in Brazil in general, has suffered in recent years due to recurring droughts and even freezing temperatures. Prices for sugarcane have been low as well due to poor sugar and ethanol margins for the region's sugar mills.

As a result, sugarcane producers in the region have found it difficult to make a profit growing sugarcane. Even at the current lower prices being paid for soybeans, some farmers feel soybeans offer a better profit opportunity than sugarcane.

A sugarcane crop in Sao Paulo is only profitable if the production exceeds 200 tons per hectare. This generally occurs only until the fifth cutting and only if the sugarcane is managed correctly. When sugarcane reaches 5-6 years of age, the yields start to decline by about 10% per year and when production drops below 200 tons per hectare, the field needs to be replanted. Replanting a field of sugarcane is an expensive proposition and instead of undergoing a costly renovation of the sugarcane, some farmers have opted to plant soybeans instead

In the area of Vale do Paranapanema, which consists of 16 municipalities in southern Sao Paulo, the Coopermota Cooperative estimates that the soybean acreage in their area will increase 5% this growing season due mainly to switching from sugarcane to soybeans. Even with that increase, the soybean production in the region is expected to be only 150,000 hectares, which is very small compared to the sugarcane acreage.

If sugarcane prices rebound in the future, most of these new fields of soybeans are expected to be returned to sugarcane production.