Brazilian Soybeans Expand, Farmers Squeezed

WASHINGTON - Mar 19/08 - SNS -- Brazilian soybean area will increase in 2008-09, but high prices are more than offset by escalating production costs, cautions the U.S. agricultural attache for the country.

"It is difficult to understand how Brazilian soybean farmers are reportedly still struggling while CBOT prices are at historic highs," the U.S. agricultural attache wrote in a recent report on the country's soybean sector. "However, there are several factors that contribute to the continuing lukewarm financial state in which farmers find themselves.

"The first important factor is farmers' timing in selling this crop's soybeans. Up to 70% of Mato Grosso farmers sold their crop before the CBOT price rally last fall; at or below $12 per bushel in their established process of selling their future crop soybeans for inputs with multinational trading companies. Current soybean prices are $16 per bushel.

"Another negative factor for farmers in Brazil and elsewhere is the rising cost of inputs. As the price of soybeans rises, input costs concurrently rise. An important caveat is that most farmers who sold at lower prices also negotiated inputs at lower prices. Fertilizers and herbicides have increased about 75% over the course of the season. So, in spite of the missed opportunity, few producers this year will actually lose money. Profits in the Rondonopolis, MT area are reported as high as $170 per hectare.

"With respect to Southern Brazil and other areas closer to ports, margins will certainly be higher due to lower transportation costs. Transportation costs in Mato Grosso are estimated to total up to half of farmers' total costs in this state, especially in the central producing area of Sorriso/Lucas do Rio Verde/Nova Mutum. These are notably the largest soy-producing counties in Brazil."

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