June 17, 2013

Safrinha Corn Harvest Starts in Mato Grosso, Corn Prices Decline

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

The early harvest of the safrinha corn crop in Mato Grosso started last week in the central and northern part of the state where the corn was planted at the end of January or early February. The Mato Grosso Institute of Agricultural Economics (Imea) estimates that 56% of the safrinha corn in the state had been planted by February 21st, which is generally considered to be the end of the ideal planting window for corn in the state. The latest corn in Mato Grosso did not get planted until mid-March, which is pushing the limits of when corn can be planted in the state. The harvest pace will accelerate as more corn matures and the majority of the safrinha corn in Mato Grosso should be harvested by the end of July. Mato Grosso is Brazil's largest safrinha corn producing state responsible for approximately 40% of Brazil's safrinha corn production.

Harvest pressure has resulted in declining corn prices in the state. In the city of Sorriso in central Mato Grosso corn prices have fallen 7.5% during just the past week to R$ 11.00 per sack of 60 kilograms or approximately US$ 2.40 per bushel. This is the lowest price paid for corn in central Mato Grosso since September of 2010 and it is well below the cost of production.

These low corn prices could have a chilling effect on next year's safrinha corn acreage in the state. Without the prospect of making a profit growing corn, farmers in the state may seek out alternative crops to plant after soybeans instead of an expensive corn crop. Some of the more popular alternatives are cotton, grain sorghum, sunflowers, dry beans, and millet.

Some farmers are also considering planting longer maturing soybeans in order to avoid trying to harvest the soybeans during January, which is generally considered the heart of the rainy season. During this past January many farmers were frustrated by heavy rains that delayed their soybean harvest resulting in lower yields and poor seed quality. If they plant longer maturing soybeans, then whatever second crop they plant needs to be a shorter maturity crop such as sunflowers, dry beans, or grain sorghum.

The Brazilian government has agreed to purchase some of the excess corn production in the state as a way to help support corn prices. They have indicated that they will purchase up to 3 million tons of the estimated 17.3 million tons of corn expected to be produced in 2012/13. The corn is generally purchased in a series of auctions where the government pays a guaranteed minimum of about R$ 13.00 per sack or approximately US$ 2.95 per bushel.

Once the government purchases the corn, much of it is then transported to northeastern Brazil where it is resold to small livestock producers in the areas hardest hit by the ongoing two-year drought. Last week a shipment of 20,000 tons of corn was delivered to the state government of Bahia, 30,000 tons were delivered to the state government of Ceara, and next week 25,000 tons will be delivered to the state government of Pernambuco.