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August 8, 2016

Domestic Corn Prices in Brazil continue to Surge Higher

The safrinha corn harvest in Brazil is approaching a conclusion in parts of Brazil and as the bad news concerning the yields continues to mount, domestic corn prices in Brazil continue to increase. Adverse weather all across Brazil has resulted in what could only be described as a disastrous safrinha corn crop.

In the state of Mato Grosso, the safrinha corn harvest is 90% complete and the Mato Grosso Institute of Agriculture Economics (Imea) is estimating the corn crop at 20.2 million tons or down 22.8% from last year (-5.9 million tons). Mato Grosso is the largest safrinha corn producing state.

In the state of Parana, the safrinha corn harvest is 60% complete and the Secretary of Agriculture for the state of Parana is estimating the crop at 11.3 million tons or 13% below earlier estimates. Parana is the second largest safrinha corn producing state.

In the state of Mato Grosso do Sul, the Soybean and Corn Producers Association (Aprosoja.MS) is estimating the crop at 6.0 million tons or 31% below last year's production of 9.0 million tons (-3 million tons).

As a result of the tight corn supplies and the prospect that Brazil could even run out of corn, domestic corn prices continue to soar higher setting new highs since the second half of July. The average price of corn in Mato Grosso, which has the greatest supplies of corn, is currently R$ 30.77 per sack ($4.37 per bushel), which is twice the price of last year at this time when it was R$ 15.00 per sack (approximately $1.90 per bushel).

In other regions of Brazil where the available corn supplies are even tighter, the price of corn is in the range of R$ 49.00 per sack or approximately $6.96 per bushel. These prices are not expected to decline any time soon, in fact, they may go even higher.

Brazilian farmers are expected to plant 5-10% more full-season corn this growing season, but the full-season corn crop only accounts for approximately one-third of Brazil's total corn production. A more sustained relief from the very tight corn supplies will only be achieved when the 2016/17 safrinha corn harvest gets underway next June and July. Until then, it is anticipated that Brazil will be forced to import corn in order to sustain the livestock industry in southern Brazil.