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November 25, 2013

Efforts to Increase Corn Usage Underway in Mato Grosso do Sul

With an excess of corn production in the center-west region of Brazil, efforts are underway to consume more the corn locally instead of relying on the federal government to subsidize the high cost of transporting the corn to other regions of Brazil. Those efforts include: increased usage of corn to produce ethanol between sugarcane harvests when sugarcane is not available, increasing the production of hogs in the region, and increasing the number of cattle placed in feedlots.

In the municipal of Sao Gabriel do Oeste located in northern Mato Grosso do Sul, the goal is to vertically integrate the livestock industry in the region and to eventually consume 100% of the locally grown corn. Shipping out higher value meat products, both beef and pork, is seen as a much better alternative to transporting bulk commodities such as corn to livestock producers or exporters in southern Brazil. A thriving livestock industry is also seen as a way to reduce freight costs, increase local employment, and keep more of the money in the local economy.

The biggest potential for growth in the livestock industry is the number of cattle that could be placed in feedlots. In the state of Mato Grosso there are 21.5 million head of cattle making the state the fourth largest beef producer in Brazil. Most of the cattle are grass-fed on the state's 11 million hectares of pastures, but as much as 80% of the pastures in the state are in less than optimum condition. The carrying capacity of the pastures is low due to poor soil fertility and a lack of renovation of the pastures. As a result, more of the cattle are being finished in feedlots to improve meat quality and profits.

The corn produced in the region is double cropped after the first crop of soybeans is harvested. The amount of double crop corn production has increased tremendously in recent years as near record high corn prices convinced farmers to adopt this new cropping sequence. During the 2012/13 growing season, corn production in the region was extremely good and as a result of the excess corn production, domestic corn prices have fallen to below the cost of production.

Low corn prices are good for feedlot operators, but not for farmers of course and it remains to be seen if farmers in the region will reduce their double crop corn acreage in response to the low prices. Low corn prices are also expected to stimulate hog production in the region and pork producers are already consuming approximately 30% of the locally grown corn.

The most innovative new use of use of corn (at least in Brazil) is to use the corn to produce ethanol during the time of the year when sugarcane is not available (December to March). To sugar mills in Mato Grosso have already been retrofitted to use corn or grain sorghum to keep the mills operating year round and other mill operators in the neighboring state of Goias are contemplating doing the same thing. Even though this a novel way to use corn, the total volume of corn used in this manor is very small.