The higher price of seeds and herbicides pulling high cost of the next soybeans crop in Brazil

Date:07-24-2013

According to experts, the higher price of seeds and herbicides in Brazil  have speed up the cost of grain producers who are preparing to plant the next crop in the country, signalizing a tighter products supply.

On the other hand, the amount spent on fertilizers was stable this year - which accounts for the largest share in the producers’ costs.

Inputs, which include fertilizers, seeds and pesticides, are 8-10% more expensive for the 2013/14 soy season that will begin to be planted in the 4thquarter, according to Cepea survey, a University of Sao Paulo research center.For corn season, the cost increase is 5 percent.

Cepea’s estimative measures monthly production costs in the country, including March through June, period the farmers concentrate purchases.

The research center says herbicide is among the items with the greatest increase for soybeans production, an elevation of 30-40%, depending on the region, and seeds had an increase of 15-20%.

Farmers in MatoGrosso, the state with the largest soybean crop in Brazil, felt the higher costs more strongly, the costs were the highest observed according to the MatoGrosso Institute of Agricultural Economics (IMEA), connected to the producers’ federation.

The cost of the package of inputs has increased 24.3%, compared to last season. The highest increase was observed in seeds, nearly 49%, according to IMEA.

"This year we had a problem in Bahia, where there is the highest seed production, and also here in MatoGrosso. There were problems in 2012/13 crop season and the main varieties available in the market had an increase in the market," explained IMEA’s manager, Daniel Latorraca.

Besides the tighter offer, experts point the increased area for oilseed another factor of high prices.

Consultants have estimated a planting of more than 29 million hectares in 2013/14, an increase of more than 1 million hectares compared to the previous season.

Cepea’s analyst, Victor Ikeda, explains that there were higher prices due to a restriction in glyphosate manufacturer, one of the chemicals most widely used in China.

In MatoGrosso, the soybean seeds and herbicides accounted for a share of just over 11% of inputs costs each. Fertilizers are 50% of the costs according to the IMEA. The weight of each item varies depending on each region.

Fertilizers

CEPEA estimates that about 80% of the inputs for the next crop has already been acquired, which allowed many producers to avoid effects on the real lower fertilizer prices.

Most of fertilizers used in Brazil are imported.

The deliveries of fertilizers in the first five months of the year advanced 3% according to the same period in 2012, says the National Association for the Promotion of Fertilizers (ANDA).

Informa Economics FNP prepared estimated cost in May - before the major impact of the increase of the dollar price - estimated that this input prices decreased from 1-5.4% from the previous crop, depending on the region. "A producer made his account and has already purchased fertilizer, he necessarily had a major operation. Fertilizers’ traders begin to change the price lists. It is going to get more expensive in the 2nd half of the year," said Aedson Pereira, an analyst from the consulting group.

Cepea estimated price stability, considering another methodology."We've noticed in June that in some cases accelerated fertilizer sales. Whoever who was doubtful has already bought fertilizer," said Victor Ikeda, Cepea researcher, quoting producers that tried to avoid even higher prices.He said that in recent weeks Cepea received news that dealers were resetting the price for fertilizer almost every day.