Brazilian farmers face best, worst of times

El Niño brings rains, but high production costs may dampen South American soybean production

Sorry to get all literary on you, but it is the best of times for soybean farmers in Brazil, and it is the worst of times, too. It's the best of times because the weak El Nino effect that had been lurking harmlessly in the background for months is now turning into a big deal—and that means rain on the plains across Brazil. The worst of times because South American farmers are ponying up eyebrow-raising amounts to grow soybeans.

Sticker shock
Sticker shock is typically one recognized feature of Brazilian pre-planting - that period in the months before September 15 of each year before one can legally hook up a planter in most Brazilian states. But this year it's more than sticker shock: it's a new reality.

Though Brazilian farmers did a bit better than you did on beans this past season, due to a trick of the exchange rate, they still didn't do all that well. And now they're coming to terms with a grim reality: it is going to cost them a lot to grow each acre of beans this year. Production costs will be up 14% over last year in local currency terms, says Brazil's Embrapa ag research agency, at least in one Brazilian state. "Compared to 2014-2015," says a researcher, "production costs for conventional soybeans rose 14.4%; 15% for RR (Roundup Ready) soybeans; and 13.6% for RR2," says Alceu Richetti, Embrapa researcher.

Psychology
I know what you're saying, and you're technically right The Brazilians got a lot more for their beans at sale time than they should have, and so it is hard to feel sorry for them now that the bills for fertilizer are coming in. And you're right. But psychology, friends, is a good portion of farming, and this hits, psychologically, below the belt.

That said, what are the Brazilians going to do? They have to plant, and they've really got only one big crop to plant. So it seems likely that the hope represented by a 2015-16 soybean crop will weigh greater than the despair represented by stupid-high cropping costs, and the Brazilians will, once again, plant more beans. But not that many acres more beans.

The opinions of James Thompson are not necessarily those of Farm Futures or the Penton Farm Progress Group.

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