Falling profitability with lower prices and productivity should lead to a smaller planted area in the season
04/03/2024
Falling soybean prices and productivity are reducing the profitability of the crop in the 2023/24 season and should lead to a smaller planted area in the following cycle in Mato Grosso, the largest producing state.
According to the Mato Grosso Institute of Agricultural Economics (IMEA), the total cost of soybean production for the 2024/25 crop will increase by 1.2% compared to the current cycle, reaching R$7,367 per hectare. The expected gross revenue is R$5,517 per hectare, down 6.1%.
“In general, we expect a reduction next season because if the same investment package is maintained, farmers will not be able to monetize the crop,” IMEA Head Cleiton Gauer told reporters during an online event on the state crop. IMEA will release the first planting estimate in May.
Brazil’s soybean and corn production is expected to see the greatest loss in the 2023/24 harvest in the last 25 years amid a drop in grain prices and productivity, according to the Center for Advanced Studies in Applied Economics (CEPEA).
In the 2023/24 harvest, the 18.4% drop in the average price of soybeans and 18.2% in productivity outweighs the positive effect of the 36% reduction in fertilizer prices and 24% in seeds, said Mauro Osaki, a researcher at CEPEA. According to these calculations, farmers face losses with any productivity below 50 bags per hectare and any price below R$100 per bag.
Regarding the 2024/25 harvest, CEPEA calculates that productivity of 55 bags per hectare will be required to cover costs.
According to Mr. Osaki, the outlook for the second corn crop is more positive, but profitability is still insufficient to cover losses from soybeans. “Considering the current price of R$38 per bag and the average productivity of 120 bags per hectare, the profitability is R$3 per hectare,” he said.
Glauber Silveira, the executive director of the Brazilian Corn Growers Association (ABRAMILHO), said that the current corn crop is “less weird” than soybeans because of the rains in March and early April. But he added that prices do not pay production costs and the consequence should also be a reduction in corn planted area in the 2024/25 season.
IMEA estimates for the 2024/25 corn crop in Mato Grosso an increase of 8.1% in the cost of production, to R$6,345 per hectare. Gross revenue is projected at R$3,214, down 8.1%. With the average price of corn at R$30 per bag, the crop will have a negative EBITDA of R$1,456 per hectare in the next cycle—in the current crop, the loss is R$547.05.
For soybeans, with the average bag price at R$94.80 and costs similar to those of the current cycle, the estimate is EBITDA of R$91.08 per hectare, considering the historical average productivity of 58 bags per hectare. In the 2023/24 harvest, the productivity calculated is 52.81 bags per hectare, which generates a negative EBITDA of R$164 per hectare, according to IMEA.
*Por Cibelle Bouças — Belo Horizonte
Source: Valor International