March 13, 2013

Northeastern Brazil Still in Midst of Drought, Needs Corn

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

While much of Brazil will be harvesting a record soybean and corn crop in 2012/13, the farmers in Northeastern Brazil are still in the grips of a multi-year drought that has withered their crops once again. After crop yields fell as much as 90% in 2011/12, insufficient rains in the region have resulted in another disappointing corn crop. Much of the corn demand in northeastern Brazil is generally supplied by the corn grown in western Bahia, but much of Bahia has not seen a good rain for over a month, which is expected to result in a 30% reduction in corn yields.

In 2011/12, farmers in western Bahia produced 2 million tons of corn and 40% of the crop was shipped to other states in northeastern Brazil, which was insufficient to meet their needs last year, and the situation could be even worse in 2013. Even though there appears to be a record large corn harvest on the way in the center-west region of Brazil, the problem is getting the corn shipped to livestock producers in northeastern Brazil. Small livestock producers in the region cannot afford to pay the high shipping costs so they must rely on the federal government to pay for the transportation.

The farmers in greatest need are in the states of Ceara, Rio Grande do Norte, Paraiba, and Pernambuco. The corn crop in these states was reduced by 90% in 2012 due to the drought and the situation has not improved much since then leaving small livestock producers desperate for whatever corn supplies Conab can ship into the region.

One of the biggest drawbacks is the fact that it is cheaper to ship corn to export facilities in southern Brazil than it is to ship the corn to northeastern Brazil. When a truck hauls soybeans to the ports in southern Brazil from states such as Mato Grosso, they can back-haul products such as fertilizers, which help to defray the costs. When they haul corn from Mato Grosso to northeastern Brazil, they have to return empty, making the costs even higher.

Conab says they have a lot of corn to send to northeastern Brazil, but the cost of freight and the limited number of available trucks is hindering their efforts to ship the corn. Most of the grain hauling trucks are busy hauling a record large soybean crop.

After waiting for a month, farmers in the interior of Paraiba finally received a shipment of 37 tons of corn, but all the corn was sold at subsidized prices by Conab for a few more than 20 livestock producers, leaving many producers without any corn for their animals. Farmers were limited to just 1,500 kilos which was a quantity insufficient to meet their animal's needs after a prolonged period of drought.

All the regions of the northeast still are in dire need of corn. A Conab office responsible for 34 municipalities near the city of Fortaleza needs 5,500 tons of corn per month to meet the demand of local livestock producers, but during the first two months of 2013, they have received a little more than 10% of what is needed.

In Brasilia, the director at Conab in charge of the program, Marcelo Araujo, acknowledges that the corn has been insufficient, but the demand is expected to be so high in 2013 that the program will not be able to supply all the needs in the region. The program has been authorized to purchase 300,000 tons, 50,000 per month, make extra effort to transport what has already been purchased.