October 3, 2013

Corn Prices Continue to Slump in Mato Grosso

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

Slumping corn prices have led to very slow corn sales in Mato Grosso, which is Brazil's largest corn producing state. During September, the corn prices in the state averaged R$ 10.13 per sack of 60 kilograms (approximately US$ 2.00 per bushel), which was the low point thus far for 2013. The average price in September 2012 was R$ 19.10 (approximately US$ 4.40 per bushel) with some farmers selling their corn for as much as R$ 23.20 per sack (approximately US$ 5.25 per bushel). If farmers were fortunate enough to sell their corn during July or August of 2012, the prices were even higher.

The ultra-low prices are the result of a combination of record large production, high transportation costs, falling international corn prices, logistical bottlenecks, and a lack of adequate storage capacity for the crop. The Mato Grosso Institute of Agricultural Economics (Imea) estimates that the cost of producing the corn in the state is in the range of R$ 12 to R$ 16 per sack or approximately US$ 2.37 to 3.15 per bushel.

The Brazilian government has been trying to support the local corn prices by purchasing corn at a guaranteed minimum price of R$ 13.00 per sack (approximately US$ 2.95 per bushel) through its Pepro Program. Thus far they have purchased 6.7 million tons of corn or about one third of the state's total production. Even with these substantial purchases by the federal government, it still hasn't been enough to support the local corn prices that in some cases has fallen to low as R$ 7.60 a sack (approximately US$ 1.50 a bushel).

As a result of the very low prices, farmers have been very slow sellers of their 2013 corn with only 44% of the crop sold compared to 90% that was sold last year at this time. Farmers are expected to continue to be slow sellers at least in the near term. They will have to empty out their grain bins though before they start harvesting their 2013/14 soybean crop early next year.