March 1, 2012

Livestock Producers in Southern Brazil ask for Government Help

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

Livestock producers in Rio Grande do Sul are anxiously awaiting action by the federal government to help supplement their dwindling supplies of corn and forage due to the ongoing drought in the state. According to the Federation of Agricultural Workers in Rio Grande do Sul (Fetag), an estimated 55,000 producers of hogs, poultry, and dairy are in urgent need of supplemental assistance to keep their animals from succumbing to the drought.

As soon as it became apparent in December that the drought was going to severely impact the production of corn in the state of Rio Grande do Sul, Fetag petitioned the federal government to quickly set up a program of subsidized corn purchases for its members. Conab has conducted similar programs in the past to help defray the cost of transporting corn from Mato Grosso to southern Brazil.

According to Fetag, its membership would need a minimum of 142,000 tons of corn per month for their animals, but unfortunately most of the available corn is located in Mato Grosso and the cost of transporting the corn to southern Brazil is prohibitive.

How the process would work is still be debated, but a broad outline has emerged. Only livestock producers in municipalities that have declared a state of emergency would be eligible for the program. Producers would need to register with the local Emater office as to how many animals they have and the amount of corn needed to supplement their rations. They would then be authorized to purchase 50% of their needs at subsidized prices.

Fetag has requested that the price of the corn be the minimum set by the government which is R$ 17.46 per sack (approximately US$ 4.66 per bushel). In the first meeting with Conab, government officials indicated that it might be possible to price the corn at R$ 19.10 per sack plus a 10% charge making it R$ 20.40 to the producer (approximately US$ 5.45 per bushel).

When the program can be started will depend on when the bureaucratic process can be completed. Even though the request was made over 60 days ago, it has not yet been published in the official register, and until it is, no official action can be taken. The corn for the program is currently stored in Conab approved warehouses in Mato Grosso. It would take at least three weeks once the program is approved before the first shipments of corn would arrive in Rio Grande do Sul. Even when the corn starts to arrive in the state, there is an additional problem in the state because many parts of the state does not have approved warehouses to temporarily hold the grain until producers can purchase it. So even if the program was approved immediately, it would still take weeks before any corn would be available for the producers.

These type of programs in Brazil are notorious for being too little and too late and this proposed program would probably fall into the same category. The initial program is expected to last for three months at which point it could be extended depending on the needs of the livestock producers.