SAO PAULO, Brazil (DTN) -- A recent surge in Brazilian soybean prices will prompt farmers to substantially increase planted area in the upcoming 2016-17 season, consultants forecast.
Area will grow by 1.2 million acres to 2.5 million acres or more, confounding initial expectations that area would not expand significantly for the first time in nearly a decade, they said during the BM&FBovespa Agribusiness Perspectives seminar in Sao Paulo.
"Nobody can resist planting at these prices with farmers planting on pasture all over Brazil," said Anderson Galvao Gomes, grain analyst at Celeres, a local farm consultancy.
Soybean prices are at record levels, hitting R$98 per 60-kilogram bag ($12.74 per bushel) at Paranagua port (CIF) on Thursday. That's up 45% on a year ago.
In addition to the surge in international prices, domestic shortages following breakneck exports in the first half of the year have pushed domestic soybean prices sky high.
With leftover stocks now in the hands of well-capitalized farmers, Brazil will likely operate with sizeable price premiums for the rest of the year.
While prices have spiked, rises in production costs have been modest.
According to Agroconsult, a farm consultancy, the average production costs will rise just 5% in Sorriso, center-north Mato Grosso this year, reaching R$2,288 per hectare ($265 per acre), not including land costs.
Area only won't grow more because of limited availability of credit due to the ongoing crisis in Brazil and the financial problems of large groups that held substantial dollar-denominated debt ahead of last year's devaluation of the real.
It also won't grow more because of the problems of farmers in the expansion regions in the eastern Cerrado, which covers Maranhao, Tocantins, Piaui and Bahia states. Another year of drought caused losses totaling R$3 billion ($869 million) to farmers in the region and will force them to reduce planted area.
As a result, Brazil will only increase area by 2% (1.2 million acres) this year compared with 6% in 2014-15 and 3% last year, said Andre Pessoa, director of Agroconsult.
With summer corn area also likely to expand, soybean will grow mainly on pastureland, often in established grain areas.
"With farmers on the frontiers in problems and many large farms in difficulty, expansion will occur elsewhere," said Fernando Muraro, grain analyst at AgRural, who thinks area could grow by 2.5 million acres.
Similarly, corn prices are also at unprecedented levels after Brazil committed up to 60% of its second-crop for export and then suffered drought losses in Mato Grosso and the center-west.
In response, Brazil will likely increase its 2016-17 second-crop planted area by 2.5 million acres, or around 9%, said Agroconsult's Pessoa.
He sees total corn planted area rising 7% to 42.7 million acres in 2016-17.
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