Agricultural producers have never had such high incomes as they are currently obtaining. This is shown by data from Brazil and the USA, two of the main food producers.
In Brazil, in addition to greater production volume, farmers receive record prices, especially those who made less anticipation of sales.
The higher the percentage of anticipated sales, the lower the profitability, since previously agreed prices were at lower levels than the current ones.
In the US, gross revenues reached the level of 2012, a period of drought and high appreciation of commodities.
When it comes to agriculture, however, you can never count the expected results as definitive. The situation of Americans, however, after a few years of punishment, will be quite different in the 2021/22 period.
If yields and expected average prices are confirmed, soybean revenues in the 2021/22 harvest will be 62% higher than in 2019/20, per hectare. Corn, on the other hand, rose 31% in the period, according to data from the Department of Agricultural Economics at Farmdoc, which brings together a group of researchers focused on the agricultural sector at the University of Illinois.
For Americans, it’s a good financial boost on the farms of this state, a major producer in the Midwest. For this liquidity to materialize, however, good productivity and high prices are needed, as estimated by the USDA (US Department of Agriculture) in the most recent assessment of supply and demand for the sector.
Farmdoc researchers calculate that a high-yielding farm that gets 228 sacks of corn per hectare, at an estimated price of $5.70 per bushel by USDA, will have gross income of $3,057.
This will be the largest ever received by producers, and it will come only from crops, without the need to complement payments from other government sources, as is usually the case.
In 2019, revenues totaled US$ 2,207, but 15% of this amount came from supplementing special programs.
In the case of soybeans, a yield of 76.2 bags per hectare in the 2021/22 crop year and an average value of $13.85 per bushel will allow gross revenues of $2,328 in Illinois. In 2019, it was only US$1,636, with 17% of this amount coming from supplements to special programs.
The calculations for the 2021/22 harvest refer to the forecast of average prices to be received by producers in the marketing period from September this year to August 2022.
Current agricultural prices in Brazil are also very attractive, but gains vary from state to state, and even from producer to producer.
Mato Grosso producers made an anticipation of sales in a percentage higher than that of Paraná. These, consequently, will have a better income because they will get a higher average price.
In the 2020/21 harvest, in general, Brazilian producers had almost stable production costs compared to the previous harvest. Prices were better, but in some regions the loss of productivity was more intense. Even so, producers should have one of the best profitability in history for the sector.
Soy producers in Mato Grosso, the national leader, should obtain average prices in 2021, 35% higher than in 2020. In Paraná, this increase could reach 52%.
For the 2021/22 harvest, Brazilian producers are more cautious with advance sales. With that, they should obtain a better average price, as long as the values remain high.
The next harvest, however, will have a higher cost, coming mainly from fertilizers. Early sales strategy and productivity will define profitability. High prices, however, may keep revenues above current levels.
For the consolidation of good results, Brazil and the USA depend on China, the main importing source. According to data released on Monday (7) by Secex (Secretary of Foreign Trade), Brazil exported the equivalent to US$ 42 billion in food from January to May, 23% more than in the same period last year. These values do not include cellulose, cotton, wood and others.
The Americans, also driven by China, should have exports of US$ 164 billion in 2021 in agribusiness, a record.
The big challenge for producers is to know how long these prices will remain attractive. In the coming years, production costs will be higher, and leases and land values will be higher.
This adjustment could bring difficult moments for those who do not have good management.