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January 14, 2016

Strong Corn Exports Worry Livestock Producers in Southern Brazil

Livestock producers in southern Brazil are concerned that rising domestic corn prices could cut into their profit margins as they compete with exporters for needed corn supplies. Brazil is expected to export a record amount of corn in 2015/16 due to the devaluation of the Brazilian currency which makes Brazilian corn more competitive in the international market. The average price of corn for export from Brazil during the first week of January was 12% higher than during the first week of January in 2015.

Agrolink reported that the Agricultural and Livestock Confederation of Santa Catarina (Faesc) is warning that a lack of corn during the first half of 2016 could drive up feed costs for livestock producers in the state. Since there is not enough full-season corn produced in southern Brazil to meet the needs of livestock producers, most of the corn utilized by livestock producers in Santa Catarina must be imported from central Brazil, primarily the state of Mato Grosso. All the corn produced in Mato Grosso is grown as safrinha corn and corn supplies should start to improve only after the start of the safrinha corn harvest in June and July.

Livestock producers in Santa Catarina utilize 6 million tons of corn annually to produce more than a billion chickens and 12 million hogs, but the state only produces 2.5 million tons of corn. In 2005, the state planted 800,000 hectares of corn, but the corn acreage has been declining steadily over the past decade and in 2015, the state only planted 300,000 hectares of corn. This lack of corn makes the state more reliant on imports from central Brazil. The first crop of corn in Brazil in 2016 is expected to produce less than 28 million tons compared to 40 million tons in 2008. The safrinha corn crop is currently estimated at 54.5 million tons.

The Brazilian Animal Protein Association (ABPA) is warning of potential increases in poultry and pork prices due to the increased cost of corn and soybean meal in southern Brazil. In addition to increases for feed ingredients, livestock producers are also facing increases in energy and labor costs as well.