May 24, 2012

Big Safrinha Crop Could Lead to Record Brazilian Corn Exports

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

Farmers in Brazil have been pleased with the development of their safrinha corn crop after a slightly rocky start. In Parana for example, the germination of the corn crop was less than ideal due to dry conditions, but since then the weather has been favorable for the development of the crop. In Parana, 87% of the corn is now rated as good, 12% is average, and only 1% is rated as poor. Approximately half of the crop has already pollinated and one third of the crop is into the grain filling phase.

According to the latest report from Conab, the safrinha corn production in Brazil should be 40% larger than last year due to both an increase in acreage and yields. In Mato Grosso the safrinha acreage increased 39% from 1.84 million hectares to 2.55 million. In Parana the acreage increased 12.5% from 1.72 million hectares to 1.93 million. While the corn is still developing in both states, the yields are expected to be much better than last year's problematic crop.

Domestic corn prices in Parana remain strong at R$ 20 per sack of 60 kilograms, but farmers are concerned that prices will decline when the corn harvest begins in July. They are hoping that corn exports stay robust and act to support prices above the R$ 15 per sack that it cost to produce the corn. Conab in fact, is expecting Brazil's corn exports to be 10.5 million tons in 2012, which would surpass last year's 10 million tons of corn exports. Many analysts in Brazil expect Brazil to export 11 million tons of corn or more, which would surpass the old record of 10.9 million tons set in 2007.

Helping to propel the corn and soybean exports has been the weakening of the Brazilian currency, which is now trading at approximately 2.08 to the dollar. The weaker currency makes Brazil'Ms exports more competitive in the world market. Between January and the end of April, Brazil exported 11.2 million tons of soybeans, which is 36% more than the same period last year. At the Port of Paranagua, soybean exports during the same time totaled 3 million tons, which is 68% more than last year.

With strong export demand, soybean prices at Paranagua continue to be above R$ 60 per sack, which translates to interior prices in the state of R$ 56 to R$ 57 per sack.

While these prices continue to be favorable for corn producers, they are causing problems for hog and poultry producers who have seen their profits evaporate in the face of high feed costs. Livestock producers in southern Brazil have petitioned the federal government to help subsidize the cost and the transport of corn into the region to help them stay in business. The government has started to auction off corn from government stocks, but the volume sold thus far has been modest.