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January 16, 2014

Brazilian Farmers Undecided about Safrinha Corn Acreage

Farmers in Mato Grosso are in the early stages of harvesting their 2013/14 soybean crop, but many are still undecided about their plans for a second crop following the soybeans. The second crop has traditionally been planted to corn, but domestic corn prices in the state have been below the cost of production for the last several months and as a result, some farmers have decided to reduce their safrinha corn acreage.

Corn prices in the state have improved over the last few weeks, but they have just recently inched higher than the cost of production. Corn prices in Mato Grosso averaged R$ 13.64 per sack during the month of December (approximately US$ 2.70 per bushel), which was the highest it has been since August. During the second week of January, corn prices in the state averaged R$ 15.25 per sack (US$ 3.00 a bushel), which was 8.8% higher than the last week of December. Most farmers in the state feel the cost of producing the corn is in the range of US$ 3.00 to 3.50 per bushel.

The improved prices are the result of dwindling supplies of corn in the domestic market and lower estimates from the USDA concerning the 2013 corn crop in the U.S. If these prices are sustained over the next few weeks, some farmers in the state may revise their previous decision to reduce their 2013/14 safrinha corn acreage.

Up until this point, the indecision on the part of the farmer has resulted in slow sales of seed, fertilizer, and chemicals for the safrinha crop. It has also resulted in very little of the safrinha corn crop being forward contracted. Farmers are waiting to see how the weather and the market develop over the next few weeks before making the final decision concerning their safrinha corn acreage.

The Mato Grosso Institute of Agricultural Economics (Imea) anticipates that farmers in the state will reduce their safrinha corn acreage by 12% from 3.7 million hectares in 2012/13 to 3.2 million hectares in 2013/14 and the total corn production will decline 24% from 22.5 million tons to 17.0 million tons.

Sales of last year's corn advanced quickly during the month of December. Farmers in the state of Mato Grosso have now sold 90% of last year's crop, but there still remains about 2.2 million tons of corn to sell in the state. The recent sales pace has quickened not only due to the improved corn price, but also because the corn needs to be moved out to free up storage space for the impending soybean harvest.