August 11, 2015

Corn price in Mato Grosso improve due to Weaker Currency

The Brazilian currency has devalued approximately 25% compared to the U.S. dollar since the first of the year. As a result, the domestic price of corn in Brazil has strengthened which has benefited Brazilian corn producers especially in the state of Mato Grosso which is the largest corn producing state in Brazil.

Corn prices in Mato Grosso at the end of last week were in the range of R$ 14.10 to R$ 19.20 per sack of 60 kilograms which was up from R$ 13.60 to R$ 18.60 per sack at the start of the week. The highest prices are in the city of Alto Araguaia, which is located in the southeastern corner of the state where transportation costs to the export facilities are lower. The lowest prices are found in the northern and northwestern part of the state which are further away from export facilities.

Corn prices are certainly better than last year and farmers are now confident that they will be able to turn a small profit on their 2014/15 corn production. Before the currency devalued, farmers were concerned that they would lose money on their 2014/15 corn production.

Domestic soybean prices in Brazil have improved as well which is expected to spur an increase of 3-5% in soybean acreage for the 2015/16 growing season. As a result, it is expected that Brazilian farmers will continue to reduce their full-season corn acreage in favor of more soybean production. Farmers will shift more of their corn production to the safrinha crop which may account for more than 65% of Brazil's total corn crop during the 2015/16 growing season.

The weaker Brazilian currency makes Brazilian corn more competitive compared to U.S. corn which is expected to result in record corn exports from Brazil. The domestic corn price could strengthen further if the currency continues to decline.

The weaker currency is not all good news for Brazilian corn producers because it also drives up the cost of producing the next crop of corn. Seventy percent of Brazil's fertilizers are imported as well as the majority of the chemicals, and a weaker currency makes imports more expensive.