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May 16, 2014

2013/14 Corn Sales Remain Slow in Mato Grosso

Farmers in Mato Grosso are just now wrapping up the sale of their 2012/13 corn crop after 19 months of selling the crop. A record crop of over 22 million tons of corn was produced in in the state in 2012/13 and farmers have struggling ever since with the resulting low corn prices. Forward contracting of the 2012/13 crop started in November of 2012 and they are now just finishing selling their crop, 19 months later.

At one point in mid-2013 the price of corn in the state dipped to below US$ 2.00 a bushel for several months and some grain companies would not even offer bids for corn. Their silos were full and they had no space to put additional corn. According to the Mato Grosso Institute of Agricultural Economics (Imea), the average selling price in the state over the entire 19 month period was R$ 14.51 per sack of 60 kilograms or approximately US$ 3.00 per bushel. The cost of producing corn in the state is estimated at about three dollars a bushel, so some farmers made money on their corn crop and some farmers lost money depending on their yields and when they sold the crop.

Due to the low prices, the federal government stepped in and purchased many millions of tons of the 2012/13 corn crop in the state at the guaranteed minimum price of just under three dollars a bushel. The government then subsidized the shipment of the corn to livestock producers in southern Brazil, to exporters in southeastern Brazil, and to subsistent farmers in drought ravaged sections of northeastern Brazil. The cost of this program to the federal government is still being calculated, but it will total multiple billions of reals.

By the beginning of May 2014, approximately 21% of the 2013/14 corn crop had been sold, which is approximately the same percentage as last year. In absolute terms, there has been 1.6 million tons less of corn sold at this point than in May of 2013.

Farmers continue to be slow sellers because of the uncertainty concerning their production and the expectation of improved corn prices going forward. With reduced domestic supplies of corn compared to last year, farmers are expecting improved prices after the peak of the corn harvest in Mato Grosso passes in June. Corn production in the state is expected to be slightly more than 15 million tons or approximately 7 million tons less than last year.