Brazil to expand soybean area by 3% in new crop despite high costs

RIO DE JANEIRO, BRAZIL – Farmers in Brazil, the world’s largest producer and exporter of soybeans, are expected to expand soybean acreage by about 3 percent in the 2022/23 crop, which will be sown from September, as they continue to expect positive profitability even in an environment of higher costs.

A survey of eight analysts conducted by Reuters found that soybean acreage could reach a record 42.2 million hectares in the new season, paving the way for an increase in grain production coupled with a potential increase in productivity.

Preliminary forecasts from experts point to a historic 147.9 million ton crop, but in the most optimistic projections, some see the possibility of production exceeding 150 million.

“The positive farm margin scenario for the 2022/23 crop will expand soybean acreage. Despite the high prices of the main agricultural inputs, the scenario will encourage producers to increase their acreage,” said Marcela Marini, an analyst at Rabobank Brazil.

Daniele Siqueira, an analyst at AgRural, a consulting firm, said the higher costs would limit but not prevent the area’s advance. For them, the profitability of the crop will not be as high as that of the 21/22 crop, but it still makes sense for the grower.

For the 2021/22 cycle, the Mato Grosso Central North, which had a good crop, is projected to have historical profitability of 130% of the farm production costs for landowners, AgRural said.

For the new crop, Siqueira expects profitability to be half that of 2021/22.

The war between Russia and Ukraine, which triggered sanctions against the Russians and their ally Belarus – two of the world’s top fertilizer suppliers – has increased spending on fertilizers, about 85% of which Brazil imports to meet its consumption.

Product continues to arrive in Brazil, and farmers are racing to secure the supply to be used in the 2022/23 planting season, but at much higher prices.

Federal government data show that in the first three weeks of this month, the average price of chemical fertilizers purchased was US$772.4 per ton, up from US$324 in June of last year.

In addition, there is the logistical bottleneck, exacerbated by the restrictions against Covid-19 in China, which weighs on the costs of the agricultural sector and delays the arrival of pesticides in Brazil.

In this regard, AgResource Brazil, a subsidiary of the U.S.-based AgResource Company, said it is still cautious in its projections for the Brazilian crop, but if its estimate of 144.82 million tons is confirmed, Brazil alone will account for 72.41% of the U.S. Department of Agriculture’s (USDA) estimated South American production of 200 million tons.

“And this will be crucial for Brazil to further consolidate soybean exports in the next crop,” the consultancy said.

However, Pedro Schicchi, grains and animal protein analyst at hEDGEpoint Global Markets, pointed out that a counterpoint to the strong area growth in Brazil at the moment is the large U.S. soybean crop expected in the second half of the year, which is already putting pressure on future quotations after September.

“However, the devalued real is offsetting some of this effect and supporting domestic prices, even if they are not as high in dollar terms after the U.S. harvest.”

With information from Forbes