June 28, 2013

Corn Prices in Mato Grosso below Minimum for Past Month

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

For the past month, the prices of corn paid in Mato Grosso have been below the minimum price stipulated by the government, which is R$ 13.02 per sack of 60 kilograms (approximately US$ 2.95 per bushel). According to the Mato Grosso Institute of Agricultural Economics (Imea), the prices officered for corn in the state over the past month have averaged R$ 12.50 per sack of 60 kilograms (approximately US$ 2.70 a bushel). This is significantly below the R$ 15 to R$ 20 per sack (US$ 3.40 to US4.50 per bushel) that was being offered last year at this time.

Farmers in the state are selling their corn at a rapid pace to take advantage of a weaker Brazilian currency and for fear of even lower corn prices as more harvested corn floods the domestic market. Producers are also afraid that a good growing season in the U.S. could pressure prices further.

A bit of good news for producers has been a weaker local currency, but a weaker currency is both good and bad for local producers. It is good because farmers then put more money in their pockets for each sack of corn or soybeans they sell. It'Jfns bad because a weaker currency means that imported products such as fertilizers or agricultural chemicals are more expensive. As a result, economists are encouraging farmers to purchase their anticipated fertilizer needs for the 2013/14 growing season as quickly as possible before the Brazilian currency weakens even further.

The Brazilian government has already started to conduct a series of auctions where they purchase corn from the farmers at the minimum price (R$ 13.02 a sack). They have committed to purchase approximately 3 million tons of corn of the 17.7 million tons expected to be harvested in the state.