Costs and benefits of soybean production in the "Cerrado" of Brazil

Abstract

Costs and benefits of producing soybean in the "cerrado" soil of central Brazil were evaluated. Total investment costs, including mechanical clearing and using high fertilizer levels, were Cr $ 15,062.00 (September of 1979)/ha. Taking in account the agricultural economic policies for this region, with interest rate of 4%, this means an annual investment cost of Cr $ 1,612.00/ha.  Annual production costs reached Cr $ 10,399.00/ha, so, total production costs were Cr $ 11,951.00/ha. Benefits were measured in terms of net profit and benefit cost ratio (B/C), which was calculated by dividing present worth of gross benefits by present worth of gross costs. At market prices, with soybean yields of 2.1 metric t/ha net profits were Cr $ 5,059.00, and the B/C ratio was 1.42; with yields of 2.5 metric tons, net profits increased to Cr $ 8,299.00 and B/C to 1.69. At garanteed federal minimum prices, and yields of 2.5 metric tons net profit decreased to Cr $ 1,174.00, and B/C ratio to 1.10; with yields of 2.1 metric t/ha, profits were negative and B/C ratio was 0,92. Therefore, soybean production in the "cerrado" soils of central Brazil may be highly profitable, yielding high benefit costs ratios, even if we consider a high interest rate on the initial investments.