March 26, 2012

Conab Conducts First Corn Sale to Farmers in Rio Grande do Sul

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

After waiting for more than three months, Conab is now starting to sell government held stocks of corn to livestock producers in Rio Grande do Sul who have been hard hit by the drought of 2011/12. As soon as it became apparent in November and December that the corn crop in the state would be significantly impacted by the severe drought, farm organizations in the state petitioned the federal government to start releasing government held stocks of corn in the state.

At the first of what is expected to be several sales, qualifying farmers may buy up to six tons of corn in six different cities in the state including: Erechim, Estrela, Garibaldi, Marau, Passo Fundo, and Santa Rosa. A sack of 60 kilograms of corn that normally would sell for R$ 27.00 per sack (approximately US$ 6.80 per bushel) can be purchased by the farmers for R$ 21.00 per sack (approximately US$ 5.30 per bushel).

According to the director of Conab in the state of Rio Grande do Sul, there are currently 14,000 tons of government corn stocks in their warehouse and 7,000 tons will be made available in this first sale. One hundred and thirty thousand tons are expected to be in their warehouses by the end of the week, and after it arrives, another 80,000 tons will be sold in future installments.

Small family farmers with livestock operations are disappointed at the price and the small volume that has been made available. The price of R$ 21.00 per sack is R$ 2.00 per sack higher than what was originally indicated. They are also disappointed that only six cities were designated for the sale. Many of the farmers live a significant distance from a designated city and it could take up to 30 days to get the corn transferred to a nearby co-op or grain elevator where it can then be delivered to their livestock operation.

Conab officials cite a lack of storage space in certified warehouses for the limited number of cities designated for the sale.

The small amount of corn being sold by the government can only partially meet the increased demand for corn in the state. Even in good years, the state cannot produce enough corn to meet the domestic demand. With corn production in the state down as much as 40% to 50% due to the severe drought, livestock producers will be forced to import corn from other parts of Brazil at very high transportation costs.