Sunday, April 28, 2013

Chat with neighbor cost of production 2014


I had a chance to catch up things with next door neighbor today.

He farms in north-central Goias state.

He is going to Agrishow also on Monday. He is driving while I am flying.
I will be back Tuesday while he is staying the week.

His family closed out 2012/13 crop with an average yield. They had a period
of 31 days without rain that took its toll.

He has been buying 2014 crop inputs with cash. So far has 30% of
2014 production locked in at reasonable prices but he is concerned
for the balance of crop inputs needed.

Fertilizer a year ago he was buying for R$ 850 per ton and this year
he is paying R$ 1250 per ton.

He also is preoccupied with lower soybean prices ahead.
It is not possible to lock in a premium price at port for next
April but multi-national offers are expected this coming week
for 2014 soybeans.

For his area in Goias state, he thinks they will start at R$38 per sac
for offers for the 2014 crop. He says it will be difficult to close any deals.
Freight variability is the big unknown.

R$38 = US$ 8.63 per bushel locally basis Goias state for 2014.
He expects bids to bounce around between R$ 36 and R$ 38/sac.

He says this barely covers the cost of production. I poked him a little
and I said its not that bad yet. He backed off a little and says to cover
all the costs of  labor, fuel, machinery payments and our land expansion,
the cash flow gets tight.

He bought land on the Goias/Tocantins border. It was pasture and
scrub brush. He is having 2nd thoughts about bringing more land
into production for 2014. It all depends on USA crop. He of course
has many questions for me as to crop prospects in USA.

This dovetails what I have included in previous newsletter as per
2014 cost of production.

Bids for Mato Grosso will likely be R$2 to R$4/sac less than Goias

I will add more soon.