Due to drop in profitability, producer must reduce soybean area in MT | Soy

The drop in profitability expected for the 2023/24 harvest, due to the scenario of lower prices and lower productivity, should lead producers to reduce the soybean planted area in the 2024/25 cycle in Mato Grosso. The assessment was made by the superintendent of the Mato Grosso Institute of Agricultural Economics (Imea), Cleiton Gauer, who participated in a press conference held by Aprosoja Brasil and Abramilho with virtual transmission.

“It is unlikely that the producer will stop planting soybecause it is its main activity, but it will stop making expansions and investments in areas that demand more resources”, stated Gauer.

The director added that the prices indicated today for the next cycle do not cover costs, which should lead producers to reduce investments or look for another product to cultivate. “In general terms, the perspective is to have a reduction next season because if you maintain the same investment package you will not be able to make the crop profitable”, assessed Gauer.

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According to Imea calculations, the total cost of soybean production for the 2024/25 harvest is estimated at R$7,367 per hectare, compared to R$7,276 per hectare in the 2023/24 harvest, an increase of 1.2%.

The estimated gross revenue per hectare is R$5,517 for the 2024/25 cycle, compared to R$5,876 for the current harvest, which represents a drop of 6.1%.

In the 2023/24 harvest, producers are already suffering a decline in gross revenue per hectare of 30.1%. Production costs per hectare, however, had a much smoother reduction, of 4.5%. Imea’s cost estimates do not include rental expenses.

Still according to Gauer, with the average price of a bag of soybeans in Mato Grosso in March at R$94.80 and costs for the next harvest similar to those of the current cycle, the estimated profit before interest, taxes, depreciation and amortization (EBITDA) for the producer in Mato Grosso is R$ 91.08 per hectare. The producer’s margin for the current harvest is estimated at R$405 per hectare, considering the average productivity of the last three harvests of 58 bags per hectare.

Productivity

However, this is not what has been seen in the 2023/24 harvest. With practically 100% of the crop harvested, soybean productivity in Mato Grosso has averaged 52.81 bags per hectare, compared to 62.30 bags per hectare in the previous harvest. Production in the State is estimated at 38.44 million tons, compared to 45.32 million tons in the last cycle, a drop of 15.2%, according to Imea. With this productivity and a price of R$94.80, the average profitability per hectare is negative at R$164, according to Imea’s calculations.

“The initial scenario for 2024/25 is that it will be difficult for producers to pay credit operations”, added the superintendent.

Imea releases the first planting estimate for the 2024/25 harvest in May, so the entity does not yet have an official forecast for the next harvest.

In relation to corn production, Imea estimates production of 43.28 million tons in the 2023/24 harvest, compared to 52.5 million tons in the previous harvest, a drop of 17.6%, the result of a reduction in planted area and lower productivity depending on the climate. Average productivity is estimated at 103.86 bags per hectare, compared to 116.80 bags per hectare in the 2022/23 cycle.

Imea estimates that the production cost of the corn is at R$6,345 per hectare in the 2024/25 harvest, compared to R$5,869 per hectare in the 2023/24 harvest, an increase of 8.1%. Gross revenue per hectare is estimated at R$3,214, compared to R$3,499 in the 2023/24 harvest, a drop of 8.1%.

With the current average price of corn at R$30 per bag, Lajida’s estimate for the Mato Grosso producer is a loss of R$1,456 per hectare in the next cycle, compared to a loss of R$547.05 in the current harvest . In other words, the producer will have great difficulties in achieving profitability in the current and next harvest, according to Imea.

“If the producer does not have greater productivity, he will go through the harvest without being able to pay the bills,” said Gauer.

Abramilho’s executive director, Glauber Silveira, declared that the current corn harvest is “less weird” than the soybean harvest due to the rains in March and early April. But he added that corn prices are very low and should not pay producers’ bills at the end of the harvest.

For the 2024/25 cycle, he estimates that there will be a reduction in planted area, especially in sandier areas, which require more investment. “There must be a retreat in these areas. But how big it will be we still don’t know”, he pointed out.