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April 3, 2020

Domestic Corn Prices in Brazil remain Strong

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Domestic corn prices in Brazil continue to be very strong due to the high demand for corn and a weaker Brazilian currency. As more corn ethanol facilities come online in the center-west region of Brazil, the demand for corn to produce ethanol continues to increase. It is estimated that 8% of Brazil's ethanol production is now derived from corn.

Livestock producers in southern Brazil are also bidding up available corn supplies due to increasing meat exports especially to China. The full-season corn production in the states of Rio Grande do Sul and Santa Catarina ended up being disappointing due to dry weather during the growing season especially in Rio Grande do Sul which is traditionally a leading producer of full-season corn.

The disappointing full-season corn is currently being harvested and additional corn supplies will not be available until farmers in Mato Grosso start harvesting their safrinha corn in late May or early June. The full-season corn is traditionally used by livestock producers in southern Brazil, but this year exporters are competing for the dwindling corn supplies.

The weaker Brazilian currency makes Brazilian corn very competitive in international markets and as a result, exporters are also competing for available corn supplies. The Brazilian currency is trading in the range of 5.28 Brazilian reals to the dollar, which a record weakness for the real.

While corn prices in the U.S. continue to be very weak, corn prices in Brazil continue to strengthen. The firm Noticias Agricolas surveys domestic corn prices in Brazil on a weekly basis and their latest survey showed continued strength for domestic corn prices.

At the Port of Paranagua, corn prices increased 2.7% this week to R$ 47.00 per sack, in the city of Sao Gabriel do Oeste in the state of Mato Grosso do Sul the corn price increased 2.0% to R$ 49.00 per sack, and in the city of Luis Eduardo Magalhaes in the state of Bahia the corn price increased 0.2% to R$ 45.30 per sack. Only in the city of Assis in the state of Sao Paulo did the corn price decline last week by 1.9% to R$ 50.00 per sack.

Converting domestic corn prices in Brazil from reals per sack to dollars per bushel is difficult because it depends on the exchange rate that is used to make the conversion. If you use an exchange rate of 5.0 Brazilian reals per dollar, then the price of R$ 50.00 per sack of 60 kilograms converts to $4.54 per bushel. I think it is just better to say that domestic corn prices in Brazil are at record high levels regardless of what exchange rate is used.