SAO PAULO, July 27 (Reuters) - Falling margins for soy growers in Brazil from currency swings and rising transport costs will not derail farmers’ plans to plant a record crop come September, as strong Chinese demand is expected to buoy the market, according to agribusiness analysts.
Farmers’ margins on soy are expected to fall to half of the previous crop cycle or to between 1,200 reais and 1,500 reais (about $325-$400) per hectare, as the weaker Brazilian currency boosts the cost of imported farm inputs like fertilizers, according to a study by bank Banco Itaú BBA.
In Mato Grosso, Brazil’s biggest producer of soy, overall production costs are forecast to grow by 10 percent to 2,100 reais ($566) per hectare next season, Itaú BBA said.
“It will still be a profitable season, but not as profitable as was 2017/18,” Pedro Fernandes, agribusiness director at the bank, said in an interview.
“The fall in margins will come from a rise in costs and lower per-bag revenue because soy prices fell in Chicago.”
Nevertheless, private consultants continue to expect farmers to plant a record soy area of 36 million hectares in the 2018/19 crop cycle, up 3 percent over the prior year.
That reflects expectations that demand from China for the oilseeds will stay strong, especially after Beijing slapped a 25 percent tariff on soybeans imported from the United States, which boosted the premium paid to local farmers.
Soybeans are Brazil’s top export product with revenues totaling $25.72 billion last year, 79 percent of which comes from China, according to government data.
To keep the grains flowing, Brazilian farmers will have to deal with delays in fertilizer deliveries and a rise in freight costs after a nationwide truckers’ strike that crippled roads for 11 days in May.
The protest, which choked shipments of supplies ranging from consumer products to animal feed and fertilizers, ended after the government agreed to subsidize fuel and intervene in freight prices.
“Definitely, the market is not pleased with the new rules” setting minimum freight prices, said Steve Cachia, a director at brokerage Cerealpar.
Still, Cerealpar estimates farmers will collect a record 121 million tonnes of soybeans in 2019, up from around 119 million tonnes this year. ($1 = 3.7119 reais) (Reporting by José Roberto Gomes Writing by Ana Mano Editing by James Dalgleish)