"The Brazilian soybean producer is navigating the downturn with positive margins," states Carlos Cogo, managing partner of Cogo Intelligence in Agribusiness. According to a survey by the consultancy, soybean farmers who seized market opportunities and purchased inputs at favorable times have secured part of their profitability for the 2024/25 harvest. While not the highest margins in recent years, they are significant given the current international market conditions, which, according to Cogo, are expected to range between $10.00 and $11.00 per bushel. For instance, the gross margin—calculated over operational costs—for Cerrado soybeans stands at 27%, ensuring an average of about $350.00 per hectare. "It's a much smaller margin than during the pandemic, but still positive," Cogo explains.
Despite these positive margins, the sale of the new Brazilian harvest is delayed. Data from Cogo Intelligence in Agribusiness show that around 20% of the estimated production has been sold, compared to the usual 30% to 35% for this period. Moreover, with 25% to 35% of input purchases still pending, soybean prices are expected to face further pressure, alongside higher input costs due to a strong dollar. "Therefore, the exchange ratio has worsened, and the purchasing power has deteriorated," the consultant notes.
Carlos Cogo's perspective is echoed by Vlamir Brandalizze, market consultant at Brandalizze Consulting. "Inputs were about 30% cheaper three months ago. Those who secured their supplies then made good deals. Waiting until the last minute will cost more. It's a tight year," Brandalizze says.
Brandalizze emphasizes the need for improved management among Brazilian soybean producers in 2024. With prices around R$ 100.00 per sack across major producing regions, those who have already secured their inputs can maintain positive margins. However, those yet to make purchases will need prices above R$ 110.00 per sack in the country’s interior.
Moving forward, Brandalizze advises producers to stay alert to market peaks, dollar fluctuations, and premiums, which remain crucial for price support. Despite recent declines, port prices for the new soybean harvest range from R$ 126.00 to R$ 157.00, signaling significant demand for Brazilian soybeans.
According to the Mato Grosso Institute of Agricultural Economics (Imea) on Monday (15), the cost estimate for the 2024/25 soybean crop in the state reached R$ 3,983.89/ha, marking a 0.54% increase from the previous month. This increase is mainly due to higher fertilizer and corrective prices. Additionally, the Effective Operational Cost (COE) rose by 0.44% to R$ 5,511.79/ha.
Imea estimates that Mato Grosso producers need to sell soybeans at a minimum of R$ 95.08 per sack to cover the COE or achieve an average minimum productivity of 52.96 sacks per hectare. "The productivity estimate for the 24/25 harvest and the average negotiated price exceed the breakeven point for covering the COE. However, the scenario differs when considering COT and CT," Imea analysts add.
Both Cogo and Brandalizze highlight the importance of achieving good production averages, choosing high-performance inputs, and employing effective management techniques. "In the Cerrado, the breakeven point for those who have already purchased inputs is now 51 sacks to cover the operational cost for 2024/25. Producing 65 sacks leaves 14, similar to last year. It’s a small margin, especially for renters. Owners can make some profit. So, focus on productivity, good planting, technology, high-performance inputs, and good harvesting," Cogo advises.
Soybean Downturn and the U.S. Market
Cogo notes that the last soybean downturn cycle started in 2015/16 and ended in 2019/20, with prices between $9.00 and $9.80, resulting in a 5.3 million-hectare reduction in soybean cultivation. "A downturn is a long process, starting with reduced area. Since Brazilian producers don't typically reduce areas, this adjustment will begin with American producers who are facing higher losses," Cogo explains.
Thus, while Brazilian producers continue to see profits of around $350.00 per hectare, American producers are already incurring losses of $55.00 per acre. "They had slight losses last season and will start reducing soybean or corn areas to close the downturn cycle," concludes Cogo.
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