January 7, 2005

Brazil Soy Acres Affected By Soy Rust

Soybean expansion in Brazil is seen to be restrained by low prices as well as the spread of Asian soybean rust.

"The days of euphoria are ending," according to Ademir Henning, a plant pathologist who specializes in soybeans for the Brazilian Enterprise for Agricultural and Livestock Research, a government agency known as Embrapa.

"The margin for error is now shrinking," he added. "If producers don't spend what it takes to improve crop management and combat soy rust, they're going to lose a good portion of their crops and go broke."

Asian soybean rust has spread to almost 80% of the country's soybean producing areas since it was detected in Brazil in 2001. It has also infected soybeans grown in Argentina, Paraguay and Bolivia.

Last year, Brazil experienced heavy rainfall in its soybean producing regions, making it difficult to control soybean rust and leading to the first decline in production in recent years. Farmers suffered over $2 billion dollars in losses.

To keep soybean rust in check, farmers must spray their crop with fungicides two to three times to control it, and that can raise farmers costs by 15%, according to the National Agricultural Confederation, a farm lobby in Brazil. Last spring, farmers received around $20 for a 60 kg (132 pound) bag, and made a heady profit. With prices now around $12.50 per bag, many farmers are worried about just breaking even.

"We've gone from a situation in which we were certain to make a big profit to one in which making a profit is no longer a given," said Paulo Freitas, who farms 37,000 acres in Mato Grosso, Brazil's largest soybean producing state.

"This is the first very bad year that I'm going to have since I started planting soy" nine years ago, added Mr. Freitas, who lost 30% of his harvest last year to rust.

Estimates of a 6% increase in acreage this year pale in comparison to the 15% increases per year seen over the past decade, making it unlikely that Brazil will overtake the United States in production this year, according to some analysts.