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July 7, 2016

Farmers in Santa Catarina in Southern Brazil may Plant More Corn

It is believed that high domestic prices for corn in southern Brazil has convinced farmers in the state of Santa Catarina to increase their acreage of full-season corn during the 2016/17 growing season. According to the Agriculture and Livestock Federation of the State of Santa Catarina (Faesc), farmers in the state are expected to increase their full-season corn acreage by 100,000 hectares from 360,000 hectares in 2015/16 to 460,000 hectares in 2016/17.

If verified, this will be the first increase in corn acreage in many years. At one point, the state produced 800,000 hectares of corn, but over the years farmers migrated their acreage to more soybean production while second crop corn acreage increased in states such as Mato Grosso. The shift in acreage left hog and poultry producers in the state more dependent on corn produced in other states.

Even with the potential increase in full-season corn acreage, the state will still have a huge deficit in corn production. The state currently needs to import more than 3 million tons of corn from Mato Grosso to meet the demand of livestock producers in the state. Santa Catarina is Brazil's leading hog producing state.

Earlier in 2016, the price of a 60 kilogram sack of corn in the state reached R$ 60 (approximately $7.80 per bushel) due to the very tight supply of corn in Brazil. Brazil was overly aggressive in their corn exports in late 2015 and early 2016 due to a weaker Brazilian currency and as a result, Brazil essentially ran out of corn in April. This forced livestock producers in southern Brazil to import corn from Paraguay and Argentina with some independent producers suspending production due to the high corn prices.

The corn price in the state has now declined to R$ 34 per sack (approximately $4.70 per bushel) due to harvest pressure of the safrinha corn crop in Mato Gross where approximately 30% of the corn has been harvested. Corn prices are expected to go higher once again later in 2016 due to the very disappointing safrinha corn crop in central Brazil.

The prospect of continued high corn prices has pushed many independent hog and poultry producers to join forces with large processors who are better equipped to supply them with the needed feed rations. It was the independent producers who suffered the most from the record high corn prices and many of them had to shut down their operations as a result.

If the weather permits, full-season corn in southern Brazil is planted starting sometime in August. Meteorologists in Brazil are forecasting that the developing La Nina in the Pacific Ocean could result in dryer than normal weather in southern Brazil during September-December. If that does turn out to be the case, farmers in southern Brazil may not plant all their intended corn acreage preferring soybeans instead which cost less to produce and are more resistant to dry weather.