August 14, 2013

Domestic Corn Prices in Brazil below the Cost of Production

As farmers in Brazil prepare for the 2013/14 growing season they are facing some very low corn prices. According to the Center for Advanced Economic Studies (Cepea), the prices for corn in the major producing states is now below the minimum price stipulated by the government. In the states of Parana, Goias, and Mato Grosso do Sul the government's stated minimum price is R$ 17.46 per sack of 60 kilograms or approximately US$ 3.60 per bushel. In the state of Mato Grosso the minimum price is R$ 13.10 or approximately US$ 2.70 a bushel using the current exchange rate.

Therefore, farmers in Brazil are looking at domestic prices that are below the cost of production and as a result, many farmers have sold their soybeans but are holding onto their corn waiting for higher prices. A lack of adequate storage space and high transportation costs are making the situation even worse in Mato Grosso where some corn prices last week were as low as R$ 9.00 per sack or US$ 1.90 per bushel.

After a record corn crop in 2012/13, Brazilian farmers are expected to reduce their 2013/14 full-season corn acreage by at least 10% and their safrinha corn acreage by 10-15% while at the same time increasing their soybean acreage 3-5% or more.