April 17, 2015

Brazilian Safrinha Corn Generally Rated in Good Condition

The weather in Brazil continues to be beneficial for the development of the safrinha corn crop. The earliest planted safrinha corn has already pollinated and is beginning the grain filling process and it is generally rated in good condition. The later planted corn is still in in vegetative development and it too is rated in good condition.

Mato Grosso is the largest safrinha corn producing state and farmers in the state have forward contracted 49% of their anticipated corn production according to the Mato Grosso Institute of Agricultural Economics (Imea). Last year at this time, farmers in the state had sold less than 15% of their corn.

The reason for the faster selling this year is the weaker Brazilian currency that is supporting domestic grain prices in Brazil. Since corn is priced in dollars but paid in Brazilian reals, the weaker the currency, the more money a farmer puts in his pocket for every sack of corn he sells. In recent weeks the Brazilian currency has strengthened somewhat compared to the dollar and it is currently trading at 3.01 reals to the dollar. In March, it traded as high as 3.3 to the dollar which was the weakest the currency has been in over a dozen years.

In the state of Goias, corn is currently priced between R$ 21.00 to R$ 22.00 per sack of 60 kilograms, but prices are lower in Mato Grosso at R$ 16 per sack. The price in Mato Grosso is about at the breakeven level for average or slightly below average corn yields. If a farmer in Mato Grosso manages to achieve a corn yield in the range of 100-110 sacks per hectare (92 to 101 bu/ac), he will turn a profit at current prices.

Domestic corn prices in Brazil might improve a little if there is a weather scare due to dry conditions during May before the safrinha corn has a chance to mature. But once the safrinha corn harvest begins in June, domestic corn prices in Brazil will probably soften due to harvest pressure.