Investment by grain producers in the 2022/23 season was among the highest in history

The costs associated with production would have amounted to more than US$ 16.4 billion in the season, 23% above the previous cycle, explained by the increase in the price of inputs.

This article estimates the investment needed by the grain producing sector to face the 2022/23 crop year. Producers face a financial challenge each year, as they must make significant investments in farm inputs, labour and other operating expenses long before they receive income from the sale of their production. The grains for which input, planting and spraying costs are estimated in this note are first and second soybeans, early and late corn, wheat, sunflower, sorghum, malting barley, and feed barley.

In the 2022/23 season, the costs associated with production were particularly high, due to the fact that most of the inputs had a very high price at the time of sowing. The combination of high sowing costs and the third consecutive year of the Niña scenario, which generated a drop of close to 40% in the country’s grain production, made for a more than financially complicated campaign for the production sector. It is estimated that the costs of sowing, spraying and inputs would have been around US$ 16,456 million, the highest in at least the last seven years. This amount is 23% higher than last season, and 47% higher than the average of the last five agricultural cycles.

The prices of agricultural inputs are often closely linked to the price of energy, as energy directly influences their production costs in many cases, as well as their transport costs. During 2022, because of the start of the war between Russia and Ukraine, crude oil reached its highest levels since 2008, and this scenario was largely reflected in the cost of the main inputs. The evolution of prices of three inputs commonly used in grain production: MAP (monoammonium phosphate), SPS (simple superphosphate) and urea, taking as a reference the month of June of each year. In the case of SPS and urea, 2022 prices were almost double those of 2021, while MAP increased by 48% year-on-year.

Thus, the cost of production per hectare for each grain in the 2022/23 season would have been, on average, US$ 656 for malting barley and US$ 521 for feed barley, US$ 356 for sunflower, US$ 688 for early and US$ 664 for late corn, US$ 387 for soybeans and US$ 298 for soybeans, US$ 323 for sorghum and US$ 534 for wheat. This is calculated based on data from the Guía Estratégica para el Agro (BCR) and the magazine Márgenes Agropecuarios at the time of sowing each crop for each production area, and using a weighted average based on its share of the area sown at the national level.

A comparison with the average costs of the last 5 years shows that the cost of sowing malting barley increased by 88% and malting barley by 82%, sunflower by 60%, early maize by 38% and late maize by 30%, soybeans by 35% and soybeans by 31%, sorghum by 63% and wheat by 74%.

Multiplying these averages per hectare by the estimated sown area for each grain, based on GEA’s own estimates and those of the Secretariat of Agriculture, Livestock and Fisheries, gives the total cost that would have been incurred by producers in Argentina in the 2022/23 season, which amounts to US$ 16,456 million and is made up of US$ 16,456 million for the 2022/23 season. 456 million and is made up of US$ 4,326 million for first soybean, US$ 3,948 million for late corn, US$ 3,148 million for wheat, US$ 1,428 million for second soybean, US$ 1,363 million for early corn, US$ 1,106 million for malting barley, US$ 803 million for sunflower, US$ 285 million for sorghum and US$ 46 million for feed barley.

It is necessary to clarify that in this calculation only costs directly related to production are computed, i.e., costs related to sowing, fertilization and spraying of crops. Other costs of great importance in the producers’ equation, such as leasing, commercial costs, harvesting, freight, income, and profit taxes, among others, are not computed.

Source: https://bcr.com.ar/

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