June 13, 2011

Inadequate Grain Storage Continues to be Problem in Mato Grosso

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

The Brazilian agricultural sector never seems to be able to get ahead of the curve when it comes to infrastructure development. They always seem to be playing catch up when it comes to transportation networks, port capacity, and adequate storage facilities for the ever expanding grain production in Brazil. The inadequate storage situation was on display once again last week when elevator operators in Mato Grosso warned that some of the safrinha corn may have to be stored on the ground.

Farmers in Mato Grosso will start to harvest their 2011 safrinha corn crop this week and grain elevator operators are warning that they may once again be forced to store some of the corn on the ground due to a lack of adequate storage space. There are 2,123 grain storage facilities registered in Mato Grosso with a static capacity of 27 million tons. In 2010 there were 2,115 grain storage facilities registered (only seven new unites registered since 2011) with a capacity of 26.7 million tons.

Among the private sector, there may not be a problem with storage, but that will probably not be the case with grain owned by the federal government. For the last several years, Conab has purchased grain from farmers at a guaranteed minimum price which was higher than the market price in the state. The government then paid to have the grain stored and shipped to end users or exporters in southern Brazil. It is unclear if that program will be utilized gain this year because the market price for corn is much higher than it was a year ago.

The problem is that Conab does not have enough of its own storage units to hold all the gain that is purchased from the farmers. Conab has five storage facilities across the state with a capacity of 200,000 tons. The excess gain must be stored at private facilities, but only 73 of the 2,115 registered facilities in 2010 were certified to handle government owned grain or just 3.4%. Many companies have no interest in storing government owned grain due to the burdensome requirements that come along with the grain. Besides, most private grain facilities are already operating at near or above capacity. Therefore, the corn that may be stored on the ground will potentially be the corn purchased by the government.

Officials from Conab feel they will be able to handle the grain without resorting to open-air storage like what occurred for the last two years. One of the reasons for their confidence is that last year 3.3 million tons of corn was carried over in the state from the year before, but the carry over this year is only 1.3 million tons. Additionally, it has not yet been announced just how much corn in Mato Grosso the government intends to purchase. If they purchase significantly less corn in 2011 than they did in 2010, then maybe no open-air storage will be necessary.

The private sector elevators are also confident that they might be able to just squeak by with their existing storage capacity. The strong soybean prices have been encouraging farmers to let go of their soybeans thus freeing up storage space. Additionally, the soybean crop in the state is estimated by Conab to be 1.5 million tons larger than the 2010/11 crop, but the safrinha corn crop is estimated to be 1.5 million tons less than last year.