Brazilian farmers are cutting spending on high-tech soybean seed treatments, a move that could reduce yields and tighten supplies next year, according to Boa Safra CEO Marino Colpo.
Sales of the company’s more advanced seed-treatment packages are running below previous years as growers seek to contain costs, Colpo told investors on a conference call.
Boa Safra offers industrial seed treatments ranging from about $290 (1,500 reais) to $960 (5,000 reais), on top of the roughly $1,540 to $1,920 (8,000 reais to 10,000 reais) growers pay for a big bag of soybean seeds.
“Our margin on the 5,000-real treatment is much better — even higher than on the 1,500-real one — but farmers are very cautious and holding back on technology,” Colpo said. “They’re focusing on seed quality but choosing more basic treatments.”
The shift could result in “slightly lower” soybean supplies next year, Colpo said, adding support to expectations that prices could recover.
“If everyone uses less technology, production declines,” he said. “With supply and demand more balanced, even a small change in supply should keep prices firm.”
Colpo stopped short of calling the outlook a bull market, describing it instead as a recovery from price levels seen in recent years.
Brazilian soybean prices have risen 6% over the past month, according to the Cepea-Esalq indicator for the port of Paranaguá. The benchmark stood at 148.95 reais ($28.65) per 60-kilogram bag on Aug. 14.
Better Seeds
While growers are spending less on treatments, they have continued to prioritize seed quality — an area where Boa Safra says it is better positioned this year.
Executives expect the current season to be the best in the company’s history in terms of seed quality. Boa Safra has been more selective in accepting soybeans for seed processing, and output is expected to reach about 90% of capacity, or roughly 252,000 big bags.
Colpo said higher quality should help reduce losses and improve operating efficiency after excess inventories weighed on margins last year.
“Last year, the company’s margin fell sharply because of high leftover volumes,” Colpo said. “We had 25% in leftovers, compared with an average of 20%, and as low as 17% in some years.”
Boa Safra is also reducing its product portfolio for next year and working to improve efficiency at recently opened production facilities as part of efforts to cut losses and rebuild margins.
“There’s still work to be done, but the improvement in efficiency indicators is noticeable,” Colpo said. “We’ve gained efficiency across all our plants.”
Working Capital Improvements
Boa Safra also improved working-capital efficiency in the second quarter, partly through negotiations over the timing of royalty payments, CFO Felipe Marques said.
With borrowing costs higher, the company will only bring payments forward if it can secure better terms than last year, Marques said. Otherwise, it will postpone payments to ease pressure on working capital. The negotiations are expected to progress during the third quarter.
Boa Safra shares (SOJA3) jumped nearly 19% on Monday, the first trading session after the company released its latest results. The stock is still down 36% over the past year, trading at 5.97 reais ($1.15).
Boa Safra has a market value of about $136 million (709.5 million reais) on B3, the Brazilian stock exchange.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
