Brazil Soy Outlook
LUCAS DO RIO VERDE, Brazil (DTN) -- Margins promise to be slightly tighter in 2014-15, but the recent expansion in Brazilian soybean production will likely continue next season.
For the eighth year in a row, Brazilian planted area will grow, this time by three million acres to 77 million acres, forecasts Agroconsult, a local farm analytics firm.
"And it could be that area will grow more," Fabio Meneghin, a partner at Agroconsult, told an audience in Lucas do Rio Verde, northern Mato Grosso.
Expansion will come with the conversion of pasture and brush in the east of Mato Grosso, the No.1 soy state, in the northern state of Para and in the northeastern states of Piaui and Tocantins, he said.
Derci Ferrarin Jr is one of the farmers set to open more cropland. Along with his father, he already plants 50,000 acres in northern Mato Grosso and will continue to convert land in the region.
"We are expanding as part of a long-term plan. We believe this is excellent business," he told DTN.
Ferrarin expects to have expanded planted area to 75,000 acres in five years.
COSTS EDGE HIGHER
For the 2014-15 season, costs are seen rising 3% in Mato Grosso as increases in chemical and seed costs are offset by a drop in fertilizer prices. While an increase in costs is never good, the pace has slowed from 10% last year.
Overall, costs of producing a hectare of soybean in Sorriso, Mato Grosso, will rise to R$1,515 ($270.20 per acre), not including land or depreciation costs, said Agroconsult.
Chicago soybean futures signal a sharp drop in prices from November, but local prices are not expected to fall as rapidly. Average prices in Mato Grosso are seen slipping marginally from R$50 per bag to R$48 in December, the consultancy forecasts.
The incentive to planting can be seen in the ratio of exchange.
Input suppliers typically offer a complete package of seeds, chemicals and fertilizers in return for the delivery of the resulting soybeans.
The terms of exchange is 22.7 60-kilogram bags of soybeans per hectare (20 bushels per acre) for the 2014-15 season, which is slightly lower than 23.1 bags in 2013-14.
Sales have been strong over the last month or so.
"We have sold 100% of the volume of exchanges we were expecting for 2014-15. It looks to be another big year," said Volmir Xavier, who runs Agrofertil, a fertilizer company in Lucas do Rio Verde.
According to Xavier, insecticide demand continues particularly strong amid concerns about caterpillar attacks.
THE GOOD TIMES AREN'T OVER
While margins promise to be a bit tighter, they remain very healthy by most standards.
Profitability in Mato Grosso will slip from R$1,024 per hectare ($183 per acre) in 2013-14 to R$857 in 2014-15 ($153 per acre), not including depreciation or land costs, the consultancy forecasts.
For the 2014-15 season, Agroconsult forecasts production will rise from 87.5 million metric tons this season to 94.0 mmt next year.
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