August 2, 2013

Silo Bags Used for Record Large Corn Crop in Mato Grosso

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

With more than three quarters of the safrinha corn harvested in Mato Grosso, farmers and grain elevators have been improvising different storage methods to accompany the record large production. Many of the storage facilities in the state are still occupied by the 2012/13 soybean crop so therefore the grain elevators have had to pile some of the corn on the ground as well as putting some of it into horizontal silo bags. Silo bags have been used in northeastern Brazil for a number of years, but their use is relatively new in Mato Grosso.

According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers and grain elevators in the state have purchased enough silo bags to store approximately 2.4 million tons of the estimated 17 million ton corn production. The average cost of a bag is R$ 1,400 (US$ 650) and the equipment needed to fill and empty the bags can cost up to R$ 80,000 (US$ 36,000). The investment in machinery is quite high so those making the investment will be using bags for many years to come.

These bags are not a permanent solution to the chronic lack of storage but they can function as a temporary solution. If the corn is put into the bags in good condition, it can stay for up to 12 months while maintaining ideal moisture content.

The capacity of the traditional grain silos in the state is approximately 29.4 million tons, which is not nearly enough to store both the soybean and corn production at the same time. One advantage in the state is that they do not harvest the two crops at the same time. The soybeans are harvested primarily in February and March while the corn is harvested in June and July.

The chronic lack of storage extends to the federal government as well. Conab routinely purchases grain from Brazilian farmers in order to help stabilize prices and to supply grain for grain-deficit areas of the country such as northeastern Brazil. To do so, they need to store grain, but their grain storage capacity is woefully inadequate to do the job. Conab has 21 storage facilities in Mato Grosso with a capacity to store only 200,000 tons. Many of those facilities are in a state of disrepair and are not utilized to their full capacity.

The government is trying to address the problem by allocated R$ 150 million to upgrade Conab's storage facilities and another R$ 350 million to construct ten new facilities in different Brazilian states.

The decking international corn prices have put pressure on domestic prices as well. Corn prices in Mato Grosso are approximately 40% below the level of July 2012. The government has already purchased about 4 million tons of corn in the state through a series of auctions at the minimum price of R$ 13.02 per sack of 60 kilograms (about US$ 3.00 per bushel). Even with these purchases, the prices offered by the local grain companies continues to be very low with some as low as R$ 9.00 per sack or approximately US$ 2.00 a bushel.