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November 27, 2020

Brazilian Farmers Already Purchasing Inputs for 2021/22 Soy Crop

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Farmers in Mato Grosso, which is Brazil's largest producer of soybeans and corn, are already investing some of their anticipated record profits from their 2020/21 soybean crop in their 2021/22 crop, which they will start planting in September of 2021.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the average spot price for soybeans in the state of Mato Grosso last Friday was R$ 173 per sack (approximately $14.83 per bushel). The prices are so elevated because of the strong demand for soybeans both internally and externally and the fact that there are very few soybeans left to sell from the 2019/20 crop.

The cost of production for the 2020/21 soybean crop in the state increased 10%. Therefore, a farmer in Mato Grosso needs to sell his 2020/21 soybeans for R$ 59.54 per sack in order to cover his production costs (approximately $5.10 per bushel). Farmers in the state have forward contracted as much as 70% of their anticipated 2020/21 soybean production for prices much lower than the current spot price, but they are still anticipating to pocket record profits.

Looking forward, farmers in the state are already using some of their anticipated profits on their 2020/21 soybean production to lock in some of their inputs for the 2021/22 crop. Imea estimates that farmers have already purchased 24% of their inputs for the 2021/22 crop.

Input costs are expected to increase as much as 13% for the 2021/22 soybean crop. Imea is expecting the cost of seeds to increase 9%, fertilizers are expected to increase 9% and chemicals are expected to increase 11%. To a large extent, these increases are the result of the devalued Brazilian currency compared to a year earlier. Land rents are also expected to increase next year due to the high soybean prices and strong demand for increased soybean production.

Imea is calculating the cost of producing the 2021/22 soybean crop in Mato Grosso at R$ 4,619 per hectare or about $352 per acre. With a yield of 54 bu/ac, that would equate to a cost of production of approximately $6.50 per bushel.