Though Brazil’s agricultural expansion is reshaping the global grain market, farmers there and in the U.S. farmers are suffocating under rising production costs and low grain prices.
Supported by investment cash, however, Brazil continues to expand acreage and pull in buyers, including China.
“Brazil’s crop is very competitive,” Commstock Investments President Matthew Kruse says on this week’s Ag Marketing IQ In Depth. If China meets its minimum trade requirements with the U.S. Kruse says, “They’ll likely go back to buying Brazil’s crop. That’s going to hurt us.”
Kruse, an Iowa native who also farms in Brazil, offers insights from his experience farming in both countries.
As U.S. farmers well know, the low-price/high-cost financial conundrum is exacerbated domestically by rising input costs, which have skyrocketed since the pandemic. Fertilizer costs are especially painful.
“Fertilizer is going to kill us next year,” Kruse says. “We need $5 corn and $12 soybeans just to break even, but the market isn’t there.”
While Brazil’s agricultural boom has been fueled by aggressive expansion—averaging over 5% annual growth in acreage until this year—Kruse sees signs of strain. High interest rates, ranging from 15% to 18%, also pressure Brazilian growers. And farm bankruptcies are increasing in Brazil.
Despite these challenges, Brazil’s dominance in the global soybean market is undeniable and Kruse worries U.S. farmers may back away from the crop. He hopes his neighbors stay in the fray.
“If we cut back on soybean acres, we’re just ceding that market share to Brazil,” he says. “We need to keep soybeans in rotation, not just for the market but for agronomic reasons, too.”
A good rotation, Kruse notes, reduces corn production cost and supports higher yields, which helps lower the cost per bushel.
To hear more first-hand observations on the differences and similarities between growing grain in Brazil and the U.S., watch Ag Marketing IQ in Depth as Kruze shares his experience.