July 1, 2013

Prices Declining as Safrinha Corn Harvest Progresses in Brazil

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

Farmers in Mato Grosso have harvested approximately 20% of their 2013 safrinha corn crop and grain elevators in the central and northern Mato Grosso are already piling the corn on the ground due to a lack of storage space. Piles of corn from the record crop will probably remain on the ground until the summer rains begin again in September or October.

The chronic lack of storage space is not unique to Mato Grosso, but it is more severe in areas of Brazil where the agricultural expansion is occurring much more rapidly than the increase in storage space. The government is trying to address the problem in the 2013/14 Harvest Plan by providing R$ 5 billion per year for the next five years of low interest loans designated for the construction of additional storage units. The legislation also provides for the renovation and expansion of public storage capacity for Conab as well.

The safrinha harvest in southern Brazil is not as advanced as it is in central Brazil due to wet weather over the last two weeks. In Parana and Mato Grosso do Sul approximately 10% of the corn has been harvested and unfortunately, there is more rain in the forecast. The heavy rains could lower the yield potential somewhat in southern Brazil, but farmers are still expected to harvest a record crop due to the expansion in safrinha corn acreage.

Farmers in the interior of Brazil are not only concerned about the lack of storage space, but also about the declining corn prices. Due to the ultra-high transportation costs, corn prices decline as the distance from the ports increase. In Sorriso in central Mato Grosso, corn prices have fallen to as low as R$ 10 per sack of 60 kilograms or approximately US$ 2.20 per bushel, which is significantly below what the government considers the minimum price of R$ 13.02 per sack or approximately US$ 2.90 per bushel.

Corn prices improve of course as you get closer to export facilities. At the Port of Paranagua, the price for a sack of corn is approximately R$ 26.00 (US$ 5.60 a bushel), while in the interior of the state of Parana it is R$ 21.00, in Rio Verde located in southern Goias it is R$ 19.00 and in central Mato Grosso it is as low as R$ 10.00 per sack.