November 19, 2013
Brazilian Farmers Delaying Input Purchases for Safrinha Corn
One of the biggest questions in Brazil continues to be how much safrinha corn will be produced in 2014 since safrinha corn now accounts for more than half of all the corn produced in Brazil. The early planted soybeans will start to be harvested in January allowing enough time to plant a second crop of corn before the recommended planting window closes at the end of February. The decision on how much safrinha corn to plant and how much to invest in the crop is going to be tough call for Brazilian farmers. Domestic corn prices in many parts of Brazil are below the cost of production and input costs have risen significantly this year.
There are indications that Brazilian farmers are delaying their decision to plant or not plant safrinha corn as long as possible. In southern Goias in the municipality of Mineiros, the president of the local Rural Society indicated that less than 10% of the needed inputs for the safrinha corn crop have been purchased by farmers. Last year at this time, 70% of the needed inputs had been purchased.
The safrinha corn yields over the last two or three years in southern Goias have been very good averaging in the range of 100 sacks per hectare (6,000 kg/ha or about 92 bu/ac) at the same time that costs were reasonable. This year, the costs have risen significantly and of course no one can yet predict the yields. Traditionally, safrinha corn production in Brazil has been a risky proposition. Farmers have been fortunate the last couple of years because the rainy season has been extended resulting in record high yields. If the rainy season would end earlier than normal, safrinha corn yields could end up being reduced 25% or more.
What I think will happen is that farmers will reduce their safrinha corn acreage while at the same time reducing their investments in the crop - plant the corn as early as possible and maybe skip planting any late corn, plant a second tier hybrid instead of a first tier to save on seed costs, and reduce fertilizer applications to save costs. If they invest heavily in the crop and then the yields end up being disappointing due to an early end to the rainy season, they could lose a lot of money. Another thing to remember is that they have benefited from high corn prices the last couple of years, but that is unlikely to be the case in 2014.
Use more corn domestically to support prices - Brazilian farmers want to plant a second crop of corn to more fully utilize the entire growing season and they are searching for ways to use more of the corn domestically as a way to support prices. One of the ways to increase domestic consumption is to use corn to make ethanol during the time of the year when sugarcane is not available (December to March).
Two sugar/ethanol mills in Mato Grosso have already been retrofitted to use corn (or grain sorghum) to make ethanol in between sugarcane harvests and there are other mills in Goias contemplating doing the same thing. This will only utilize a very small fraction of the corn produced in central Brazil, but at least it is a small step in the right direction.