April 19, 2017

Record Large Crops Could Result in Storage Problems in Brazil

Brazil always has a chronic shortage of storage space for its increasing grain production, but this year it could be even worse. Brazilian farmers produced a record large soybean crop and they may also produce a record large safrinha corn crop as well, so just the large production estimates alone have people worried about having enough storage space. To make the situation even worse is the fact that Brazilian farmers have been very slow sellers of their 2016/17 soybeans.

Farmers are preferring to pay for storage and hold onto their soybeans instead of selling at the current low prices in the hope of better prices in the future. The slow selling is keeping the grain silos full of soybeans. In Mato Grosso for example, the soybean harvest is all complete and the safrinha corn harvest will start in June. If the soybeans are not moved out by then, the grain elevators will be forced to store the corn outside in huge piles.

The grain elevator operators recognize that they have the upper hand in price negotiations and as a result, they are offering very low prices for both soybeans and corn. The problem is very evident this year in the municipality of Ipiranga do Norte, which is located in northern Mato Grosso. The grain silos are full of soybeans and farmers have still not sold 40-50% of their soybeans while they wait for improved prices.

Current prices for soybeans in the region are in the range of R$ 47.00 to R$ 49.00 per sack or $6.90 to $7.20 per bushel. The situation for safrinha corn is not any better with current prices in the range of R$ 13.50 to R$ 14.00 per sack or $1.97 to $2.05 per bushel. The prices for both soybeans and corn are below the cost of production, so there is very little incentive for farmers to sell their grain any time soon. Many farmers are only selling what is needed to pay their immediate bills.

In Mato Grosso do Sul, the situation is very similar. The state has a grain storage capacity of 8.5 million tons, but the soybean and corn crops combined in the state are expected to reach 17.5 million tons or more than twice the storage capacity of the state. Very few farmers are selling their soybeans, so therefore, when the corn harvest gets underway, there will be huge piles of corn stored outside.