CHICAGO, Ill. — The term megafarm takes on a whole new meaning in Brazil.
Guilherme Scheffer, financial risk management director with Grupo Scheffer, recently described the scope and scale of one of the biggest farming operations in the country.
The company planted 169,195 acres of soybeans in 2015-16, but that land is also used to grow second crops of corn and cotton, pushing the total production area to 276,640 acres.
Total revenue for the operation fell to $170 million in 2015, down from $180 million the previous year because of slumping soybean and cotton prices.
Scheffer’s grandmother started farming on 80 acres in the state of Parana in southern Brazil.
The farm wasn’t big enough to support her eight children, so the family moved to Mato Grosso, where land was one-tenth the price it was in Parana.
Scheffer’s father and his uncles rented 1,000 acres of land in southern Mato Grosso, and 10 years later moved the operation north to the municipal district of Sapezal in Mato Grosso and formed Grupo Scheffer.
Eight of the company’s 11 farms are in Sapezal. The company owns 45 percent of the land and rents the remaining 55 percent.
“If I could, I would only rent, but you need some land to guarantee for the banks and you need some stability,” Scheffer told delegates attending DTN’s Ag Summit 2015.
Grupo Scheffer likes to sign rental contracts of 15 to 30 years. It deals with 38 landlords. Some of those were farmers who were on the brink of bankruptcy.
Grupo Scheffer advanced them the rental money to save their farms and in return received longer rental contracts.
Land in Mato Grosso rents for two percent per year of the purchase price. That works out to $60 per acre for good farmland, which is why cost of production is far lower than it is in competing export re-gions such as the United States.
The company’s cost of production for 2015-16, including land rental, is $6.60 per bushel for soybeans, $1.90 per bu. for corn and 45 cents per pound for cotton.
The company has an active hedging program.
“We have a written policy that I have to fulfill that 70 percent has to be sold before harvesting,” said Scheffer.
For the 2015-16 season, the company is 100 percent sold on soybeans, 90 percent on corn and 66 percent on cotton.
Production is consistent because of ideal weather. The most extensive crop damage in the last 30 years was 10 percent below average yields. The company tries to always double or in some cases triple crop the land. That means growing lower-yielding, shorter season, 100 to 105 day soybeans as the first crop followed by either cotton or corn.
Grupo Scheffer can seed 12,350 acres of soybeans a day and harvest 6,500 acres a day.
All of the soybean fields harvested in January are planted to cotton and all the fields harvested in February go to corn. The soybean-cotton rotation is the most lucrative.
There is also a push to include grass in the mix. Crop farmers are getting into the cattle business in a big way because it is more efficient to transport meat than corn.
Grupo Scheffer had 9,000 head of cattle this year, which will expand to 20,000 head next year and continue to grow by 5,000 to 10,000 head per year.
Scheffer said the significant investment in Brazilian ports is starting to pay dividends.
The country’s northern ports will be handling an additional 54.7 million tonnes of grain over the next seven years and the southern ports an extra 83.9 million tonnes.
New ports in the north will reduce transportation costs by $121 per acre for a typical Mato Grosso farmer.