January 7, 2014

Livestock Producers in Brazil Fear Diversion of Corn to Export and Ethanol Production

Poultry and hog producers in southern Brazil are concerned about efforts to utilize more of Mato Grosso's corn for the production of ethanol. They fear that if more corn is used to produce ethanol than less corn would be available from the center-west region of Brazil for livestock producers in southern Brazil. Southern Brazil is already at a deficit as far as corn production is concerned and if more corn is diverted for ethanol production or exports, it could increase the cost of production for livestock producers.

The state of Santa Catarina is a major poultry and hog producer in Brazil, but it must rely on corn from other parts of Brazil for its animal rations. Livestock producers transport into the state approximately 3 million tons of corn on an annual basis from the center-west region of Brazil and the cost of moving the corn from Mato Grosso to southern Brazil comes at a very high price.

Corn that is purchased in Mato Grosso for R$ 11 to 13 per sack (US$ 2.17 to 2.60 per bushel), ends up costing livestock producers in Santa Catarina R$ 26 per sack and R$ 28 per sack in Rio Grande do Sul (US$ 5.13 to 5.53 per bushel respectively). The difference is the cost of transporting the corn by truck over very long distances. There are no rail lines or barging operations connecting the two regions, so all the corn must by transported by truck.

The Santa Catarina Poultry Producers Association (ACAV) is concerned about the recent announcements by several sugar/ethanol mills in Mato Grosso and Goias that they will use corn to produce ethanol during the summer months when sugarcane is not harvested (December to March). While the amount of corn used in these operations is very small, they fear that it will open the door to more domestic corn usage and less availability of corn for livestock producers in southern Brazil.

A much bigger use of corn in Brazil is for the export market. During the 2012/13 growing season, 21% of the corn produced in Brazil was exported. Brazil is currently the second leading corn exporter after the United States with a 20% market share compared to the U.S. at a 31% market share.

During 2013, the Brazilian government has been heavily subsidizing the transport of corn out of Mato Grosso to export facilities and livestock producers in southern Brazil through its PEP and PEPRO programs. The livestock producers feel there should be added incentives to use the corn domestically because the production of poultry and hogs is a value added enterprise generating a tremendous number of jobs and economic activity within the country.