2022/23 Uruguayan agricultural cycle in review

2022/23 Uruguayan agricultural cycle in review

26 July 2023

The Uruguayan agricultural cycle of 2022/23, culminating on 30 June, unfolded unusually, according to this assessment by Exante, a local consultancy.

The period saw a remarkable expansion in the sown area for winter crops, reaching nearly 900,000 hectares. Yields remained very high, generating an impressive production volume of almost 2.8 million tons of wheat, barley, rapeseed, and carinata. Rapeseed and carinata stood out as they more than doubled their planted area and production volume from the previous year. However, the peak prices contributing to this expansion have since significantly dropped to under $300 per ton for wheat and below $500 for rapeseed. Concurrently, planting costs escalated to record levels owing to substantial price increments for crucial inputs such as fertilisers and fuel. As a result, wheat, rapeseed, and barley planting costs surpassed $1,100 per hectare, excluding land rent, leading to a discernible margin contraction for winter crops.

Summer crops, however, suffered from the worst drought in more than 70 years, causing a substantial reduction of the planted area and a historically low soybean harvest of roughly 700,000 tons. The costs associated with planting also soared to nearly $900 per hectare. Despite soybean prices averaging above $500 per ton, the combination of higher costs and limited yields resulted in substantial losses for soybean farmers.

Rice, however, bucked the trend, with an excellent harvest marked by high yields of over 9,500 kg per hectare and a total volume surpassing 1.5 million tons. The decrease in global rice supply caused international rice prices to rise significantly, nearing $600 per ton in Uruguay, which allowed for an increase in the price received by the producer to $13 per 50kg bag. However, high production costs eroded margins, notwithstanding record yields and high prices.

Beef producers grappled with the cooling of external demand, primarily from China. This triggered a considerable 8-15% downward price adjustment in beef and a noticeable contraction in slaughter. Higher costs resulting from the drought further eroded margins for local beef producers.

Overall, the 2022/23 agricultural cycle resulted in significant margin deterioration across all major activities, primarily caused by higher input costs and adverse climatic conditions. As we look forward to the 2023/24 cycle, we can expect some cost moderation and recovery from the drought to improve results for farmers, notwithstanding geopolitical and climate risks.

TLG Management Partners