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March 6, 2020

Domestic Grain Prices in Brazil Setting Record Highs

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

As Brazilian farmers harvest their 2019/20 soybeans and plant their safrinha corn, they are looking at record high domestic prices for both soybeans and corn. One of the main factors contributing to the high prices is the steep decline of the Brazilian currency compared to the U.S. dollar.

The Brazilian currency continues to weaken in spite of the Central Bank's best efforts to stabilize the currency. The currency sets a new record low nearly every day and it is currently trading at more than 4.6 reals per dollar. A weak currency is beneficial for Brazilian farmers and as a result, Brazilian farmers have been aggressively selling the soybean crop they are currently harvesting as well as the soybean crop they will plant later this year.

By some estimates, farmers in Mato Grosso have sold 70% of their 2019/20 soybean crop that they are currently harvesting as well as 30-32% of their 2020/21 crop which they will not harvest until a year from now.

Soybean prices in Mato Grosso are running as much as R$ 12.00 per sack above a year ago (approximately $1.35 per bushel). In the city of Alto Garcas, which is located in southeastern Mato Grosso, available soybeans are being priced at R$ 81.00 per sack (approximately $9.00 per bushel). Domestic corn prices in Brazil are also setting record highs.

This is not good news for Brazilian livestock producers who must purchase soybean meal and corn for their operations. For poultry producers in southern Brazil, the prior record high price they paid for corn was R$ 56.00 per sack set in 2016 (approximately $6.20 per bushel). That was surpassed this week when corn prices hit R$ 57.00 per sack (approximately $6.30 per bushel).

During the first two months of 2020, domestic corn prices in Brazil have increased 20%, while domestic poultry prices have increased 12%.

Corn supplies in Brazil are very tight and Brazilian farmers will not start harvesting their safrinha corn until June or July, so domestic corn prices in Brazil may move even higher before the new supplies become available.