In 2018, Brazilian exports of the agribusiness hit the record of 101 billion USD and, according to Cepea, soybean products contributed to this scenario. Despite this good performance, the competitiveness of the Brazilian soybean is low compared to that in other countries, such as the United States and Argentina.
According to research of Cepea and Agri Benchmark, taking into account values in national currency and adjusting with the PPP (Purchasing Power Parities - OCDE), the average production costs in two typical farms in Brazil (Sorriso/MT and Cascavel/PR) were USD 291.7/ton over the last five crops (from 2013/14 to 2017/18) against 163.8 USD/t in two typical farms in the USA (Iowa and North Dakota) in the same period, or 78% more expensive. As for Argentina, the average production cost in the Brazilian regions is almost two times more (85.4%) than that verified in the neighboring country, of 157 USD per ton.
Even considering the production system – soybean and corn (summer and second crop) for Brazil and soybean and corn (first crop) for Argentina and the US –, the profitability in Brazil is lower compared to that verified for main competitors. In Sorriso, the profitability (on the Effective Operational Cost – EOC of the soy+corn system) was 56%, against 146% in Iowa (USA) and 135% in the northern area in Argentina. Therefore, figures over the last five crops show that Brazil is behind the most competitive countries that produce soybean in the world. The advantage for Argentina compared to soybean production in Brazil is justified by the higher fertility of the soil and lower incidence of diseases. The amount of inputs values (fertilizers, seeds and pesticides) to produce soybean in Argentina is almost 3.5 times less than in Brazil.
Cepea figures indicate that, over the last three seasons (2015/16, 2016/17 and 2017/18), the average Effective Operational Cost (EOC) for soybean production in Sorriso (MT) was 11% higher compared to that verified on the average of 2012/13, 2013/14 and 2014/15 crops and 33% above that registered in the period from 2009/10, 2010/11 and 2011/12. The increase of average production cost for soybean is attributed to price increases of chemicals for crop protection, diesel and lubricants and to both higher machinery maintenance and opportunity cost for land. On the other hand, the real gross revenue over the last three crops increased only 2% in the same comparison, resulting in decreases of 14% on the profitability compared to EOC and of 36% on the profitability in relation to total costs, which considers total operational cost (TOC) plus the opportunity cost for land.
The growth rate of production cost, of 3% per year over the last 10 years in Sorriso, is an aspect to be highlighted. Higher expenses with insecticides (23.8% per year), with herbicides (8.8% per year), fungicides (7.8% per year) and mechanical operations (5% per year) influenced this increase. The increase of the gross revenue was 2.8% per year in the same period, lower than the Effective Operational Cost, which resulted in decreasing profitability (0.7% per year) for producers in Sorriso over the last 10 years.
Although the gross revenue had increased with the valuation of the product price (exchange rate, export premium and international price) in the last decade of analysis, production costs increased more because of high prices of fertilizers and diesel and the use of specific pesticides to control diseases. As a result, although the margin is positive, the amount has been reducing crop after crop. The example mentioned does not consider the depreciation on machine, interest on the invested capital and the opportunity cost of land, which indicates concerns regarding the economic sustainability of soybean producers in the long run.
In order to deal with high production costs, producers need to increase yield. Some of them gather in cooperatives or purchase groups to push up bargaining power, while others widen the production area to obtain economy of scale. Another part of producers intensify the land use to promote economy of scope of machinery and land and others differentiate the genetically modified product with the non-transgenic.
The low collection of the government has led authorities to evaluate the possibility to tax exports of agricultural commodities, in an attempt to reduce public finances. Such measures may lead soybean to be even less competitive in the international scenario.