August 24, 2016
4.2% of Safrinha Corn Acreage in Mato Grosso was Abandoned
The 2015/16 safrinha corn crop in the state of Mato Grosso, Brazil suffered from hot and dry conditions and in the latest report from the Mato Grosso Institute of Agricultural Economics (Imea), we now know just how dry it was. Imea reported that the average rainfall in the state for the month of April was 2.7 inches (68.7 mm), which was 3.8 inches (95.8 mm) less than the rainfall received in April of 2015. Unfortunately, April is the main corn pollination month in Mato Grosso and the pollination was significantly impacted by the adverse weather.
The dry weather in April was just a prelude to an even dryer period during grain filling, which in Mato Grosso occurs during May and June. The average rainfall in the state during those two months totaled only 1.2 inches (30 mm). At the same time, the temperatures in Mato Grosso were averaging in the mid-90°s.
The extremely dry weather resulted in very low corn yields and in fact, Imea is now estimating that 177,000 hectares of safrinha corn in the state were abandoned before harvest. This represents 4.2% of the 4.2 million hectares of safrinha corn planted in the state. Imea is now estimating the 2015/16 Mato Grosso corn production at 19.3 million tons or down 26% from the 26.1 million tons produced in 2014/15.
The hardest hit area was in northeastern Mato Grosso where 18% of the corn acreage was abandoned, followed by the northern region at 8% abandoned, the northwest region at 7.1%, the southeast region at 3.2%, and the north-central region at 2.2%.
Farmers in Mato Grosso had gone into the growing season expecting the rainy season to extend into June, which had been the case for the four previous growing seasons. Unfortunately, the rains basically ended in early April resulting in a disastrous safrinha corn crop. A similar scenario played out all across central Brazil, not just in Mato Grosso.
Domestic corn prices in Brazil surged early in 2016 when livestock producers in southern Brazil were forced to import corn from Argentina and Paraguay in order to keep their facilities operating. Exporters had over committed to corn exports due to the weak Brazilian currency during the second half of 2015. The corn prices surged even more when the scope of the problem with the safrinha corn crop became more apparent in April and May.
By June, domestic corn prices in Brazil reached record high levels approaching $7.00 per bushel. Prices eased back slightly when the safrinha corn started to hit the market in July. According to the consulting firm Scot Consultoria, the corn price in Campinas, Sao Paulo were approximately R$ 47.00 per sack (approximately $6.70 per bushel) at the end of July. They have weakened a little more during the month of August to R$ 44.00 per sack or approximately $6.25 per bushel.
At the end of June, the price of corn in Campinas, Sao Paulo was nearly double that of a year earlier. Corn prices in Campinas are currently about 65% higher than they were last year at this time.
Domestic corn prices are not expected to fall much further until the full-season corn harvest starts in January and they may not even fall until the next safrinha harvest starts next June. In the meantime, Brazil will need to import corn again before the end of 2016 to sustain the livestock industry in southern Brazil.