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July 18, 2013

Mato Grosso Farmers are Slow Sellers of Corn and Soybeans

As farmers in Mato Grosso continue to harvest their 2013 safrinha corn crop, the low prices being paid in the local market has made them reluctant sellers. According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers in the state have sold 43% of this year's anticipated 17 million ton corn crop compared to 65% that was sold last year at this time.

Weak corn prices in the state are the result of softening international corn prices, harvest pressure, and a lack of storage for the record large corn crop. With inadequate on-farm storage, farmers are forced to sell to the local co-op or grain company, but their storage facilities may also be full as well, prompting even lower offers for the corn. The lowest prices paid for corn last week in the state was in the city of Sorriso in central Mato Grosso where a 60 kilogram sack of corn was selling for R$ 9.00 (approximately US$ 2.00 a bushel) and the highest price in the state was in Canarana in eastern Mato Grosso where it was selling for R$ 13.50 per sack (approximately US$ 3.00 a bushel). The average cost of production in the state is approximately R$ 13.00 per sack.

Imea now estimates that 40% of the 3.05 million hectares of corn have been harvested, which is 11% slower than last year. The harvest pace is slower than last year mainly due to the delayed planting caused by wet weather. July is expected to be the biggest harvest month with the harvest ending in early August.

Farmers will start planting their 2013/14 soybean crop during the second half of September and thus far they have also been slow to forward contract their anticipated soybean production. In spite of a weaker Brazilian currency that acts as a price increase for Brazilian farmers, IMEA estimates that they have only forward contracted 27% of their anticipated soybean production. The sales are most advanced in central Mato Grosso where 34% of the crop has been sold and it is slowest in western Mato Grosso where 20% of the crop has been sold. Most farmers are only selling enough soybeans to cover the costs of their immediate inputs.

Old crop sales of soybeans is also behind last year's pace. Approximately 93% of the 2012/13 soybean crop has been sold compared to 100% last year at this time.

Over the last several years, Brazilian farmers have been rewarded for waiting to make forward sales of their crops due to weather concerns in the United States that have resulted in higher prices.