Brazil: agrochemicals and fertilizers pressure production costs

The production costs of the 2015/16 crop have been growing for Brazilian farmers comparing with the previous season. The main factor is the inflation of fertilizers and crop protection products, which are more expensive due to the devaluation of the Real comparing to the U.S. Dollar.

According to the National Supply Company (Conab), the major increase occurred with the price of fertilizers: an average of 37% in the year. Agrochemicals follow with an elevation of 32% and seeds with 10% at this crop. Inflation is felt with more intensity on the costs of production of soybeans, corn, cotton and kidney beans.

"The higher dollar brought negative consequences with more expensive agricultural inputs of fertilizers and agrochemicals. On average, the production costs of soybeans for the 2015/16 season are found 20% to 25% higher when comparing to the previous crop,” affirms agronomist Leonardo Sologuren.

The expert, who is also a master on Economics and director of Clarivi, stresses that “farmers that purchased inputs early this year, when a lot of companies sold stocks with the dollar price of last year, may harvest an exceptional result in this new crop”.

"The credit offer, however, has been a point of negative impact for the agricultural activity. Due to the higher interest rates and less appetite for loans of the part of banks because of the current state of the economy, there is credit restriction for rural producers. This restriction has retarded the sales of agricultural inputs and results in certain stress on the market,” analyzes.

Using as a reference the state of Mato Grosso – the largest soybean producer of Brazil – the production cost is R$ 3,347.33 per hectare at the 2016/2017 crop season. Of this total, the expenditures with inputs correspond with 59.4% (or R$ 1,989), according to projections of the Mato Grosso Institute of Agricultural Economics (Imea) considering the dollar rate of R$ 3.88. “The main variable of impact, as it happened in the 15/16 crop, is the devaluation of the Real. Evaluating the dollar impact over the cost of the 16/17 crop, we see that if the average exchange rate of the crop is R$ 3.01/US$ 1, which would be the same in 16/17 season, the total cost would reach a value of R$ 2,804/ha. Even not having started the input sales of the 16/17 crop, it is realizable that the weight of the dollar will be higher and, therefore, the risks increase. Even being early to draw the directions of the crop that will be planted just next year, the curtains open in a scenario a lot more delicate,” explains Imea.