March 5, 2020

Domestic Corn Prices in Brazil Continue Very Strong

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

While Brazilian farmers are in the process of planting their 2019/20 safrinha corn, domestic corn prices in Brazil continue to surge. Brazilian farmers had planted 67% of their intended safrinha corn by the end of February compared to 79% last year and 63% average according to Ag Rural.

At the same time, domestic corn prices in Brazil are approximately 33% higher than a year ago according to the consulting firm Scot Consultoria. Several factors are contributing to the strong domestic corn price including the weakening Brazilian currency which is currently trading at more than 4.5 reals per dollar. The weaker currency makes Brazilian corn more competitive in the international market.

Other factors contributing to the corn prices is strong demand from the livestock sector due to record meat exports. There is also increased demand for corn to make ethanol in Brazil. There are currently 11 sugar/ethanol mills in Brazil using corn to make ethanol. Eight of those mills were retrofitted to utilize corn when sugarcane is not available and three of those mills utilize corn exclusively. Nearly all of these facilities are located in the center-west region of Brazil. In fact, ethanol producers are paying R$ 4.00 to R$ 5.00 per sack more for corn (approximately $0.44 to $0.55 per bushel) than exporters.

In the municipality of Sorriso in central Mato Grosso, available corn is being priced at R$ 40.00 to R$ 41.00 per sack (approximately $4.40 to $4.50 per bushel). In the municipalities of Rio Verde and Jatai in southern Goias, corn is priced in the range of R$ 47.00 to R$ 48.00 per sack (approximately $5.20 to $5.30 per bushel). If the corn had to be transported to poultry producers in eastern Sao Paulo state for example, it would be priced at about R$ 55.00 per sack (approximately $6.10 per bushel).

Corn prices are also very strong in southern Brazil, which is closer to the livestock industry. In the states of Parana and Rio Grande do Sul, corn prices are in the range of R$ 48.00 to R$ 51.00 per sack (approximately $5.30 to $5.60 per bushel). These prices are higher than what exporters are paying.

Domestic corn prices in Brazil could move even higher between now and when the safrinha corn harvest gets underway in June and July. Some analysts feel the corn price could move as high as R$ 60.00 per sack (approximately $6.60 per bushel) prior to the start of the safrinha harvest. If the safrinha corn is negatively impacted by adverse weather, which results in lower than expected production, corn prices in Brazil could remain strong even after the safrinha corn is harvested. As a result, Brazilian corn exports in 2020 may end up being lower than expected.