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March 13, 2015

Farmers Reevaluate Safrinha Planting as Grain Prices Rise in Brazil

As Brazilian farmers harvest their 2014/15 soybean crop, their spirits have been lifted by increasing domestic grain prices thanks mainly to a weakening of the Brazilian currency. The Brazilian currency is currently trading at 3.12 per dollar, compared to 2.34 a year ago and 2.88 at the end of February. Since grain prices are priced in dollars, but paid in the local currency, a weakening of the Brazilian currency compared to the dollar results in a price increase for Brazilian farmers.

As an example, in the state of Parana the price of corn has increased 20% over the past six months. These price increases will not only allow farmers to sell their soybeans at a profit, it is also encouraging them to take a second look at their planting intensions for safrinha corn and winter wheat.

Corn prices in Parana are currently averaging approximately R$ 21.50 per sack of 60 kilograms, which is 18% above the minimum price guaranteed by the government of R$ 17.67 per sack. At the Port of Paranagua, corn prices last week hit R$ 30.00 per sack. The domestic price of wheat has also increased, but not nearly as dramatically as corn due to burdensome supplies of wheat carried over from last year's production. Farmers in the state are still holding 900,000 tons of last year's 3.8 million ton wheat production.

Some analysts who were anticipating a reduction of safrinha corn acreage in 2015 due to low prices have now reevaluated the situation and are estimating an slight increase in safrinha corn acreage due to improving prices. In their latest assessment of the 2015 safrinha corn crop, Conab is estimating that the safrinha corn acreage in Brazil will decline by 2.2%. Even if the safrinha corn acreage remains unchanged, the late planting of the corn could result in lower corn yields compared to last year.

The Secretary of Agriculture for the State of Parana is estimating that the winter wheat acreage in Parana will be 1.87 million hectares compared to the 1.9 million hectares planted in 2014. They are estimating that the wheat production in the state will be 4.1 million tons or 300,000 tons more than last year's frost-impacted crop.

Farmers in Parana planted 5 million hectares of soybeans, but their intention was to plant a combined 3.2 million hectares of safrinha corn and winter wheat. Therefore, there is the potential for expanding the acreage of these two crops if the prices are attractive enough.

This week generally marks the end of the ideal window for planting safrinha corn in Parana. Any corn planted past mid-March runs the risk of cold weather or dry conditions impacting the crop during the important grain filling phase of development resulting in reduced yields. This week also marks the beginning of the winter wheat planting in the state which will conclude later in May.

According to the Secretary of Agriculture for the State of Parana, the 2014 safrinha corn yield in the state averaged 5,300 kg/ha or 81 bu/ac. The 2014 winter wheat crop in Parana averaged 3,000 kg/ha or 46 bu/ac.