June 4, 2013

Fewer Cattle on Feed in Mato Grosso in Spite of Record Corn Crop

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

Even though farmers in Mato Grosso will produce a record large safrinha corn crop, the extra supply of corn has not encouraged ranchers in the state to increase the number of cattle sent to the feedlots. In their first official estimate for the year, the Mato Grosso Institute of Agricultural Economics, (Imea) indicated that they expected less than 810,000 head of cattle to be taken off of pasture and sent to feedlots in the state in 2013. This is less than the one million head that had been expected.

At a seminar in April sponsored by the National Association of Feedlots (Assocon) held in Cuiaba, Mato Grosso the number of cattle sent to feedlots in the state was estimated to increase 19.6% in 2013, which was in line with other regions of Brazil. The optimistic estimate was based on what was expected to be a record large corn crop and lower feed costs.

The director of the Mato Grosso Rancher's Association (Acrimat) Luciano Vacari, indicated that there are other factors in addition to the price of feed that impacts decisions to put cattle on feed or not. The biggest factor is the price of cattle and unfortunately cattle prices have eased in Brazil as well. Another factor is if the rancher had priced his cattle ahead of time either in the futures market or with forward contracts.

According to Imea, few ranchers take advantage of futures contracts for their cattle. Of the 810,000 head expected to be placed in feedlots in 2013, only 3% has been hedged in the futures market and another 3% has been forwarded contracted with meatpackers. This is less than in 2012 when 9% was hedged and 11% was forward contracted.

With fewer cattle on feed, that means that farmers in Mato Grosso will have to find additional outlets for the record large safrinha corn crop. The federal government has already committed to purchasing 3 million tons of corn in the state through a series of auctions where the farmers are guaranteed the minimum price for corn which is approximately US$ 3.00 per bushel.