July 5, 2013

Safrinha Corn 15% Harvested in Mato Grosso, Prices Declining

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

The safrinha corn harvest in Mato Grosso is in full swing with approximately 15% of the crop harvested. The harvest is most advanced in the central region of the state where about 25% of the crop has been harvested. The first corn being harvested was planted in January and early February and the farmers are satisfied with the yields. Some early yields are being reported as high as 123 sacks per hectare or 113 bu/ac. The average yields are expected to decline as the harvest moves into the corn that was planted in later February and early March.

The average corn yield in the state is expected to be 96 sacks per hectare (89 bu/ac), which lower than last year's 103 sacks per hectare, but the big increase in acreage is resulting in a record large corn crop. The Mato Grosso Institute of Agricultural Economics (Imea) is expected the state to produce 17.3 million tons of corn from the 3.0 million hectares planted.

While the yields are satisfactory, the prices being paid for the corn is lower than last year and it is expected to continue declining as the harvest progresses. The average price for a sack of corn in the state during the month of June was below R$ 13.00 with some areas being as low as R$ 9.00 a sack. This compares to the average price in June of 2012 of R$ 14.80 per sack. Due to the low prices, farmers are opting to store much of the corn resulting in a lack of storage space for the crop. A significant amount of the corn is now being piled outside or put into silo bags and at least 30% of the anticipated production is expected to be stored outside.

The low prices are making farmers reluctant sellers, especially since some of the prices are below the cost of production estimated at approximately R$ 13.00 per sack. The break-even price for a field that produced 70 sacks per hectare would be approximately R$ 15 per sack, but at the current low prices, a field would need to average over 100 sacks per hectare to hit the break-even level.

The Brazilian government is trying to help support the corn prices by purchasing up to 3 million tons of corn in the state, but that is only about 17% of the anticipated corn production in the state. The farmers will have to market the remaining 83% of the crop at the prevailing market price.

If the United States produces a good corn crop and international corn prices continue to soften, farmers in Mato Grosso may have to reduce their 2013/14 safrinhacorn acreage or plant alternative crops such as grain sorghum, sunflowers, dry beans, canola, cotton, millet, etc. The farmers are going to be hard pressed to plant an expansive corn crop knowing that they may lose money on the crop.