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December 28, 2010

Safrinha Corn Acreage in Brazil will Depend on the Weather

The total Brazilian corn production depends on the acreage and yields of the full season corn crop, which is planted at about the same time that the soybeans, as well as the acreage and yields of the safrinha corn crop, which is planted after the early soybeans are harvested.

When Brazilian farmers were making their planting decisions for the 2010/11 corn crop, international corn prices had not yet started to increase, and as a result, the full season corn acreage in southern Brazil fell approximately 10% in 2010/11. The state of Parana leads the decline with an 18% reduction in full season corn acreage. The full season corn acreage in Rio Grande do Sul also fell this growing season.

Since those planting decisions were made in Brazil, corn prices have strengthened and the question now is will farmers in Brazil attempt to capture some of those improved corn prices by increasing their safrinha corn acreage in early 2011.

In their latest monthly report, Conab is estimating no change in the Brazilian safrinha corn acreage compared to last year's crop, but the state extension service of Parana feels that the safrinha acreage could increase 10%, gaining back what was lost the previous year. In Mato Grosso, Imea, the Mato Grosso Institute of Agricultural Economics, is estimating that the safrinha acreage will decline by 10%, but others estimate it might decline by as much as 35%.

The final safrinha corn acreage in both Mato Grosso and Parana will be determined by the weather and the lingering effects of La Nina. In Mato Grosso, which has the most safrinha corn acres, the planting window for safrinha corn closes at the end of February, but the final plant-or-no-plant decision will depend on: corn prices, the progress of the soybean harvest, the progression of the rainy season, and the forecast when the rainy season might start winding down.

The soybean harvest in Mato Grosso is going to be 3-4 weeks later than last year due to the delayed planting and if the soybean harvest is delayed even further due to heavy rains in late January and early February, then there is a strong likelihood that safrinha corn acreage in the state will decline significantly, especially if it looks like it's going to be an extended rainy season.

In the state of Parana, the soybeans were planted in a timely fashion and if the harvest proceeds normally as well, it is expected that the farmers in the state might increase their safrinha corn acreage more than the expected 10%. Once again, the final acreage will be highly dependent on the weather and the condition of the soil moisture at the time the safrinha corn needs to be planted.

In their last monthly estimate, Conab is estimating that Brazilian corn exports for 2010/11 at 8.0 million tons, which would leave a carryover stock of 9.0 million tons, 14% less than the previous year. At the current rate of Brazilian corn exports, the total corn exports could hit 10 million tons, which would cut the carryover even more thus firming up corn prices even more and giving additional incentives for farmers to plant safrinha corn.