May 11, 2007

 

Brazil's Mato Grosso not seen expanding soy fields

 

 

Brazil's no. 1 soy producing state, Mato Grosso, will unlikely be expanding soy fields next year because of logistical and foreign exchange problems, the president of the Mato Grosso Soy Producers Association, Aprosoja, said Thursday (May 10).

 

"I see Mato Grosso farmers planting maybe the same area next year, with a current trend pointing to less area," Aprosoja's president Rui Prado told Dow Jones Newswires.

 

Prado said a weak dollar has cut into profit margins so much that the country's top soy growers are rethinking the soy business. The dollar is currently trading at six-year lows of 2.019 Brazilian reals.

 

Last month, a top trade manager at Archer Daniels Midland posed a question to a gathering of commodities investors and soy farmers whether Mato Grosso could sustain a weak dollar. The weaker the dollar, the less cash farmers get when they transfer their soy profits into Brazilian reals. Soybeans are priced in dollars and based on futures on the Chicago Board of Trade.

 

Even with prices over US$7 per bushel, the government has had to offer Mato Grosso farmers subsidies in order to make ends meet.

 

Mato Grosso was a pioneer soy town starting in the late 1980s. The state, located south of the Amazon jungle and bordering Bolivia on the west, went from zero hectares to over 5.2 million hectares of soy fields in 2007.

 

"The state is viable. Entire towns and markets were built in Mato Grosso because of soybeans. What is making soy impossible are macroeconomic issues and logistics," Prado said.

 

He said that as a result of a margin squeeze in the state, large commercial farmers are buying out smaller farmers or renting land.

 

"Soy farming and farm land is now in the hands of an ever-decreasing few. This is bad for everyone involved," Prado said. "But today, economies of scale or necessary for Mato Grosso soy growers."

 

Prado said Aprosoja had no data on the growth of land acquisitions by large land owners.

 

Prado was speaking at a meeting with representatives from US soy associations about joint marketing opportunities in India and environmental concerns. Aprosoja accompanied US soybean groups in India last year to promote soymeal and soyoil consumption.