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Decrease in profitability reduces production margin of error

Soybean and corn production chains have faced favorable situations in the last decade. The gains were reverted into land acquisition, machinery and implements modernization, construction, compliance to the Regulatory Standard 31 (NR-31), environmental regulation of rural property and other investments, to carry on the activity legally and competitively.

 

Over the last three crops (2014/15 to 2016/17), however, profitability has been decreasing significantly in the main producing regions in Brazil. In the 2014/15 and 2015/16 seasons, although price averages of commodities decreased in the international market, profitability was positive in the Central-Southern region of Brazil, given that the BRL devaluation favored soybean quotes in the domestic market.

 

On the other hand, Mapitoba (Maranhão, Piauí, Tocantins and Bahia States in Brazil) regions registered a balance close to zero or negative, due to the crop failure in 2014/15, having the worst situation in the 2015/16 crop because of El Niño effects – growers that were able to harvest in that season had negative profitability, but slightly lower.

 

Another aspect that has reduced profitability of soybean and corn is the increase of major costs of these cultures, namely seeds, insecticides, fungicides and lease.

 

As for seeds, new transgenic technologies have increased expenses per grain ton, part of this high value is compensated by the reduced use of insecticides. However, our weather conditions and production system favor attacks of other pests, which are not controlled by transgenics, reducing, thus, part of agronomic advantages offered by the new technology.

 

Therefore, rural producers claim that insecticide costs have increased over the last seasons, due to the occurrence of stink bugs and, in crops with drier weather, caterpillar attacks (inchworm and Helicoverpa sp.). Besides, prices of chemical products are higher due to the Real devaluation against US dollar, given that most active ingredients applied in the Brazilian fields are imported.

 

The land lease has also become more expensive over the last seasons, as the demand for new areas has increased with the higher price of commodities, leading growers to be more efficient in terms of production and management of financial resources.

 

The 2016/17 season ended with average yield higher than expectations. Weather favored the development of corn and soybean summer crops. Conab (National Company for Food Supply) indicates an output higher than 110 million tons for soybean and 29.8 million tons for corn. On the other hand, profitability of soybean and corn continue to move down, due to the price decrease of grains in the domestic market. This condition concerns especially growers from Mapitoba, who need to pay part of the debts from the 2015/16 season.

 

Decreases in profitability of corn and soybean also concern the 2017/18 crop planning, because the purchasing power of producers has reduced against inputs from the previous season to the price levels observed in April 2017. This scenario indicates that growers need to be cautious, as the production margin of error has decreased.

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