March 29, 2017
Corn Prices in Mato Grosso Slump to Breakeven or Below
Farmers in Mato Grosso, Brazil are worried that even though they may produce a record large safrinha corn crop in 2016/17, they may end up losing money on their corn due to depressed corn prices.
In many locations in the state, the current price of corn is half or less of what it was a year ago. According to the Soybean & Corn Producers Association of Mato Grosso (Aprosoja), in mid-March the average corn price across the state was in the range of R$ 20.00 to R$ 22.70 per sack (approximately $2.90 to $3.30 per bushel). Last year at this time, the average price in Mato Gross was about R$ 40.00 per sack or approximately $5.85 per bushel.
In some municipalities the situation is even worse. In Nova Mutum for example, which is located in central Mato Grosso, the local grain elevators are paying in the range of R$ 13.00 to R$ 15.00 per sack or approximately $1.90 to $2.20 per bushel.
The Mato Grosso Institute of Agricultural Economics (Imea) estimates that the average cost of production in the state for high technology corn production (120 bu/ac) is in the range of R$ 20.50 per sack or approximately $3.00 per bushel.
As a result of the declining prices, farmers in the state have been slow to forward contract their corn production. Imea is estimating that only 39% of the anticipated corn production in the state has been forward contracted compared to 81% last year, or less than half of last year's pace.
The local corn prices may decline even further due to the tainted meat scandal in Brazil that broke on March 17th. At that time, the Brazilian Federal Police identified 21 meat processing facilities where federal inspectors are accused of accepting bribes in exchange for certifying tainted meat products. As a result, 25 markets around the world have placed some form of restrictions on the importation of Brazilian meat.
This in turn, has slowed meat processing in Brazil as companies try to adjust their inventories to potentially lower exports. In a worst case scenario, livestock producers may be forced to cut back on their production resulting in lower domestic demand for corn.
What concerns corn farmers in Mato Grosso is the fact that they may produce a huge corn crop at a time when demand for their grain is falling.