South America Calling

Brazilian soybean production will expand in the upcoming 2014-15 season but profits will be hard to come by, says Agroconsult, a local farm analytics firm.

The consultancy pegs output at 95.1 million metric tons (mmt), up 8.3% on the year before due to a 5.0% increase in area and the expected positive impact of the El Nino weather phenomenon on yields in the south.

Agroconsult's number is in line with other recent private estimates.

With Argentina also set to produce a record crop, carryover stocks will jump 47% to 56 mmt in U.S., Brazil, and Argentina. This will just ratchet up pressure on prices, says the consultancy.

As a result, Agroconsult sees only limited upside in futures prices and projects an average price of around $11 per bushel in 2014-15.

This level of prices would allow Brazilian farmers to make a modest operating profit. Agroconsult estimates the operating margin on planting soybeans in Sorriso Mato Grosso will average at R$432 per hectare ($78 per acre) in 2014-15, down from R$713 last year.

However, these figures do not take into account land and administration costs, or new investments.

In Mato Grosso, rental costs are equivalent to around 10 60-kilgram bags per hectare, which when included into the equation, would put farmers at breakeven. Add on admin and investments and projected margins slip into the red.

The outlook for the current second corn crop is even worse, with farmers registering losses on an operating level too.

Farmers in Sorriso, Mato Grosso will lose an average of R$105 per hectare ($18.90 per acre) on this year's second corn, despite government price support that works out at around R$150 per hectare, says Agroconsult. And again, these numbers do not include land or administration costs.

Agroconsult pegs the 2013-14 second corn crop at 47.1 mmt, slightly down on the 48.0 mmt harvested last year.

It will be a tough 12 months for Brazilian farmers.

(AG)

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