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Brazil’s Soybean Planting Reaches 96%

Brazilian producers are finishing up soybean planting. Planting reached 96% of the estimated area for the 2017/2018 harvest, up from 95% last year and 93% on average for five years, according to AgRural’s survey.

To understand the Brazil soybean market requires understanding the climate, prices, and logisitcs influences within the Midwest and the South – two very different regions.

Midwest Brazil

The Central-West region is one of the five regions of Brazil, and the most important for the production of soybeans. It is made up of the states of Mato Grosso, Mato Grosso do Sul, Goiás, and the Federal District, which totaled 51.1 million tons of soybeans in the last crop.

Goiás, the fourth-largest soybean producing state, was the state that suffered most from the lack of rainfall and delayed planting of the 2017/2018 crop. The crops are in good condition now, though, according to Antonio Chavaglia, president of the Comigo cooperative, which has 6,800 associated farmers. “The planting was delayed, but now it is raining well. We are not having a major pest attack or Asian rust in the fields,” says Chavaglia. “But we believe that the fields will produce less. Average productivity is expected to be lower than last year.”

According to Chavaglia, the climate is favorable at the moment, but the delay in the planting of the soybean will generate problems for producers since harvest can also delay the second corn crop. “Some farmers will stop planting corn in the second crop to plant sorghum,” he says.

Chavaglia says soy sales are going slow in the region, with about 20% of the 2017/2018 harvest traded so far. “The price of soybeans is lower than last year, between R$ 64 (U.S. $19.37) and R$ 65 per 60-kilo bag. The reasonable rate would be R$ 70 (U.S. $21.18) a bag (60-kilo),” he says.

The main concern of the Midwest producer is the challenging financial situation, especially for farmers who lease land. According to Chavaglia, about 30% of Comigo’s associates are renters. “I don’t believe there’s good profitability,” he says. “This price of soybeans covers the cost to who owns the land. The tenant has a difficult time paying the investment and paying the crop cost,” says Chavaglia.

Also, a major difficulty in this region is transportation. “Logistics are always a problem in the Midwest. With freight price oscillation it becomes difficult to do planning. Last year, we had to pay R$ 200 (US $60.53) freight per ton of soy,” says Chavaglia. According to the president of the cooperative Comigo, for the route between the city of Rio Verde (Goiás) to the port of Santos, the freight costs are about R$ 150 (U.S. $45.40).

South of Brazil

Meanwhile, the southern region of Brazil has a more optimistic scenario. This region is formed by the states of Paraná, Santa Catarina, and Rio Grande do Sul, which together produced 40.5 million tons of soybeans in last year’s harvest.

In Paraná, the second-largest soybean producing state, the crops are developing well in the 2017/2018 season. However, the results aren’t anticipated to be better than previous years. “If we compare the fields of this year with those of last year, in terms of the development of the crop, we have a scenario 5% worse. Productivity will not have the same performance as last year,” says Dilvo Grolli, CEO of Coopavel, a large Paraná cooperative, that represents more than 5,000 grain, poultry, and pork producers. “Last year, the weather was perfect [in Paraná]. The past harvest was exceptional – above average – and the producers know that they will hardly have the same result now.”

According to Grolli, the only concern of the producer in Paraná is the climate, which is irregular in the region. There was a lack of rainfall at the beginning of planting in September and then excessive rainfall later. “It was raining 700 mm (28 inches) in November in some regions of Paraná. The average is between 300 and 400 millimeters (16 inches) for the month of November,” says Grolli. “The formation of La Niña is beginning, but of low intensity. With La Niña, the climate may be slightly drier or rains below normal in Paraná, which can lead to a fall in soybean productivity.”

The producer in the South region is in a more comfortable financial situation. “We have a production cost of soybeans around R$ 2,200 (U.S. $665.87) per hectare. If you have a productivity around 60 bags of 60 kilo per hectare, it will cost from R$ 36 to R$ 38 (U.S. $11.50), and the price of the soybean bag is above R$ 60 (U.S. $18.16),” says Grolli. “The producer remembers when the 60-kilo bag sold recently at R$ 80 (U.S. $24.21), and then the price of R$ 65 per 60-kilo bag seems low. But the forecast of profitability is good here, about 70%.”

Still, producers are following the market cautiously. So far, members of the cooperative Coopavel have sold 65% of the 2017/2018 harvest. The pace is slower compared with last year, with 75% of the crop sold through November. “The [Paraná] producer is well capitalized and has an eye on the weather, waiting for the opportunity to have better prices,” says Coopavel’s CEO.

The state of Paraná does not face major logistics problems. To cross the entire state until reaching the Port of Paranaguá, the longest distance is 750 kilometers, and the asphalted roads are considered good. In addition, there are many poultry and pork slaughterhouses in the region; the demand for soybeans and corn for animal feed is constant.

However, Grolli agrees that for the producer in the Midwest region the current situation is complicated. “The problem of the Midwest is the distance from the ports. The increase in the price of diesel increased the cost of transportation, and this cost increase comes out of the producer’s pocket,” he says.

For the second harvest, in Paraná the estimate is also a decrease in production. “There is a prospect of a 30% reduction in area planted with second-crop maize,” says Grolli. According to the CEO of Coopavel, the producer who harvests soybeans later and loses the window of ideal corn planting will end up switching to wheat.

*Calculations made with an exchange rate of R$ 3.30 per dollar.

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