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July 27, 2016

Domestic Corn Prices in Brazil increased 8% Last Week

While U.S. corn prices have collapsed, the domestic corn prices in Brazil are going in the opposite direction. Last week corn prices increased an average of 8% which was the biggest weekly increase since mid-January. The increase is coming during the heart of the safrinha corn harvest, which make the increases even more impressive.

The increases are being attributed to declining estimates of the safrinha corn crop, slow selling on the part of the producer, and buyers anxious to lock in their needs before the corn supply gets even tighter.

Corn prices for the nearby contract on the BM&FBovespa in Sao Paulo last Friday closed at R$ 47.39 per sack (approximately $6.50 per bushel), which was up 8% for the week. The price is approaching the historical high of R$ 53.91 per sack (approximately $7.40 per bushel) registered on June 2nd, which was before the safrinha harvest got underway. During the month of June, the corn price declined 22%, but during the month of July it has increased 15%.

Corn prices out in the countryside also climbed last week. In the corn producing regions of Sao Paulo, corn prices increased 6-10% last week to R$ 36 to R$ 42 per sack (approximately $4.95 to $5.78 per bushel). In Parana they increased 4-6% to R$ 35.50 to R$ 42 per sack (approximately $4.88 to $5.72 per bushel). In Sorriso Mato Grosso they increased 3% to R$ 31 per sack (approximately $4.25 per bushel).

Livestock producers are very concerned that the corn situation in Brazil is so tight that the country could essentially run out of corn again before the 2017 safrinha corn harvest gets underway next June.

Even though the corn situation is expected to get very tight in Brazil, the country is still exporting corn, but all the corn now being exported is to fulfill old contracts from months ago. Once these contracts are fulfilled, no new export contracts are expected for the foreseeable future because domestic corn prices in Brazil are expected to be much higher than the international price.