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June 11, 2015

Safrinha Corn Crop in Mato Grosso and Brazil getting Bigger

The state of Mato Grosso is the largest safrinha corn producing state in Brazil and good weather during the entire growing season is resulting in increasing production estimates. In their latest report, the Mato Grosso Institute of Agricultural Economics (Imea) increased both the safrinha corn acreage and the yield projections for the 2014/15 crop. Imea increased the safrinha corn acreage in the state by 313,000 hectares to a new record high of 3.28 million hectares.

The safrinha corn yields in the state were increased to 103.3 sacks per hectare (6,198 kg/ha or 95.4 bu/ac), which represents an increase of 10.8 bu/ac compared to 2013/14. The total safrinha corn production in the state is now estimated at 20.33 million tons or 14.7% more than last year.

Earlier in the growing season, the concern was that delays in getting the corn planted would result in lower yields as the crop ran out of moisture before it matured, but the rainy season was extended in the state and the corn crop did not encounter any prolonged periods of dry weather.

The safrinha corn crop in the second largest producing state of Parana is also expected to do very well. Farmers in Parana have harvested approximately 10% of the 1.89 million hectares of safrinha corn and corn yields are exceeding expectations. The Department of Rural Economics in the state is estimating that the safrinha corn production in the state will set a new record at more than 10.3 million tons. Nationwide, the safrinha corn crop in Brazil could also set a new record surpassing 50 million tons.

Farmers in Mato Grosso are in the early stages of the corn harvest and are reporting very good yields. In anticipation of a record large corn crop, domestic corn prices in Mato Grosso are already below the minimum guaranteed by the Brazilian government. Corn prices in Sorriso, which is located in central Mato Grosso, were R$ 13.00 per sack earlier this week or approximately US$ 1.90 per bushel (using an exchange rate of 3.0 Brazilian reals per dollar). Corn prices are expected to fall even further in the state as harvest pressure mounts.

The Brazilian government is expected to intervene to support corn prices as it has done in the past through a series of Pepro auctions where the government picks up the difference between the minimum price and the domestic price of corn. These auctions in the past have been very costly for the federal government and there is uncertainty about how aggressive the government will be to support corn prices. The general economic situation in Brazil is deteriorating in the face of rising inflation, rising unemployment, and rising deficits. The government has not yet announced any plans for Pepro auctions for corn producers.