June 25, 2008

Brazil's farmers need US$2.5 billion funding to grow 2008-09 soy crop

Brazil's government or financial groups need to provide at least 4 billion Brazilian reals (US$2.5 billion) to help soy farmers pay for rising costs for the 2008-09 soy crop, said Andre Pessoa, president of agricultural consultancy Agroconsult said at a seminar in Sao Paulo, on Tuesday (June 24, 2008).

Soy farmers in Mato Grosso, the top soy producing state, will face costs of US$964 per hectare in 2008-09, a rise of 60-percent above the 2007-08 crop, said Pessoa. The rise was due mainly to higher prices for fertilizers and pesticide

However, most other states are likely to have lower costs than Mato Grosso, he added.

Pessoa expects Brazilian soy acreage to achieve a 4.4-percent growth rate over 2007-08. However, funding would have to be adequate to achieve that level of growth, he added.

The 2008-09 soy crop is likely to be over 60 million tonnes, said Pessoa, cautioning that may be too early to give an estimate.

FM Global Research predicts a slightly lower soy acreage however, saying it should be rising between 2 percent and 4 percent.

FM Global said Brazilian soy faces increasing competition from corn, which is aided by higher productivity gains and growing demand.

Brazilian soy prices are likely to stay above US$14 per bushel for the foreseeable future, but soy acreage is unlikely to rise significantly in Brazil and Argentina, according to FM Global.

The fastest-growing areas are located in the northeast of Brazil, including Bahia and Piaui states, due to better logistics and cheaper land. Still, the central east area remains the main soy-producing region in the country.