November 26, 2012

Silos Full of Corn in Mato Grosso, Soy Harvest to Start in 40 Days

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

The soybean harvest in Mato Grosso is going to get started in approximately 40 days (first half of January) and yet there are still silos in the state that are filled with last year's safrinha corn crop. The corn needs to be moved out of the state as quickly as possible to make room for what is expected to be a record large soybean crop. The soybean harvest starts gradually, so there is still time to resolve the problem, but action needs to be taken quickly in order to avoid a significant lack of storage space for the new soybean crop.

A survey conducted in the municipality of Sorriso, which is the largest soybean producing municipality in Brazil, indicates that 40% of the storage capacity in the municipality is still occupied by corn. Collectively, the municipality has the capacity to store up to 3.3 million tons of grain. That was sufficient to meet the grain production in the region until two years ago. Increased acreage and productivity of both the soybean and corn crops now means that the farmers in the region will produce 2 million tons of grain more than the storage capacity.

A local cooperative with 22 associates estimates that its members will produce 220,000 tons of soybeans in 2012/13. The problem is that they only have 100,000 ton storage capacity and 50% of the existing storage is still filled with corn. They are currently building a new silo that will be available for the upcoming harvest, but even after the silo is completed, it still will not resolve the problem.

Corn out of position in Brazil has become a growing problem in recent years. Much of Brazil's increased corn production is in the state of Mato Grosso, but the livestock industry and the export facilities are is concentrated in southern Brazil. The poor transportation infrastructure in Brazil means that transporting the grain from the area of production to the area of consumption is very expensive.

The federal government has tried to address this problem by having Conab purchase some of the excess corn in Mato Grosso and transport it to southern Brazil where it is auctioned off to poultry and swine producers who are losing money due to a deficit of corn and high feed costs. The total amount of corn purchased by the government though is only a small fraction of the total that needs to be disposed of.

If this lack of storage space is not resolved before the peak of the soybean harvest next February, it could slow the pace of soybean harvesting in the state.