February 9, 2011

Poultry Producers Want More Gov. Action to Reduce Corn Prices

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

Poultry producers in southern Brazil are very concerned about the increase in corn prices and the impact on their bottom line. According to the Brazilian Union of Poultry Producers (Ubabef), the cost of producing poultry in Minas Gerais, Rio Grande do Sul, Santa Catarina, and Sao Paulo increased as much as 18% in 2010 due mainly to increased feed costs. In Campinas, Sao Paulo, a 60 kilogram sack of corn that sold for R$ 20 in 2009 (approximately US$ 5.00 a bushel) currently is selling for R$ 32 a sack (approximately US$ 8.75 per bushel) or an increase of 60%. In parts of Brazil where corn production is even less common, some corn prices are approaching ten dollars a bushel.

The supply/demand scenario should become more balanced once the corn harvest picks up, but the problem of corn being out of place in Brazil is a chronic problem.

The reason for the imbalance is the fact that much of the corn produced in Brazil is far from where it is consumed and the cost of transporting the corn internally is extremely high. That is why the federal government has set up several programs where they act as a middleman by paying for the cost of moving the corn from where it is produced to where it is consumed.

In response to criticisms from the poultry producers, the Brazilian Minister of Agriculture, Wagner Rossi, stated that government auctions have already put 1.6 million tons of publicly owned corn into the domestic market at a significant cost to the government. Ubabef's president, Francisco Turra, replied that the amount of corn sold by the government has barely been enough to meet the demand and certainly not enough to help lower corn prices.