July 30, 2010

Brazil's top soy producer reduces expansion plans

Grupo Bom Futuro has scaled back plans to increase production next year amid a strengthening real and higher shipping costs.

"The strong real is making us less competitive," said Erai Scheffer, president of Grupo Bom Futuro. "We would have much more of a stimulus with a weaker currency and better roads."

The Brazilian real jumped 7.3% in the past six months. The rally reduces the local-currency value of exports. The appreciation, along with higher shipping costs than in the US and Argentina, have discouraged farmers from increasing planting in major producing areas of Brazil, Scheffer said.

Brazil is the biggest producer of the oilseed after the US and Argentina is the third largest.

Grupo Bom Futuro has already sold 90% of this year's crop for an average BRL30 (US$17) per bag, compared with production costs of BRL28 (US$16), Scheffer said. Growers in Mato Grosso need to sell the oilseed at about BRL40 (US$23) per bag to make a profit, he said.