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October 9, 2013

2013/14 Soybean Planting off to Slow Start in Brazil

The planting of the 2013/14 soybean crop in Brazil is getting off to a relatively slow start due to irregular rainfall. Soybean planting has begun in four states - Mato Grosso, Mato Grosso do Sul, Goias, and Parana. The state of Parana is most advanced with 12% of the soybeans planted and the soil moisture in the state is adequate for continued planting. In Mato Grosso only 2% of the soybeans have been planted compared to 10% that was planted last year. The slow start in Mato Grosso is due to inadequate soil moisture in many regions of the state.

Nationwide, approximately 2.8% of the anticipated 2013/14 soybean crop has been planted compared to 3% planted last year when soybean planting also started out relatively slow. In the agricultural expansion areas of northeastern Brazil, farmers are still waiting for enough soil moisture to get started on planting their soybeans. The rainfall all across Brazil is expected to increase during the second half of October.

Farmers in southern Brazil are in the midst of planting their 2013/14 full season corn crop. In Parana more than 50% of the corn has been planted and in Rio Grande do Sul, approximately 60-70% of the corn has been planted. In some regions of northern Rio Grande do Sul, as much as 90% of the corn has been planted.

While farmers are planting their corn, they are also looking at the lowest corn prices in Brazil in three years. According to the Center for Advanced Economic Studies (Cepea), the price of corn in Campinas, Sao Paulo fell nearly 3% last week to R$ 23.60 per sack of 60 kilograms (approximately US$ 4.80 per bushel) and these are some of the highest corn prices in Brazil.

In Mato Grosso, which is the largest corn producing state in Brazil, corn prices have fallen to as low as R$ 9.48 a sack in the city of Sapezal or US$ 1.90 per bushel, which is a decline of 43% compared to last year. Some prices in the state have been reported to be as low as R$ 7.50 per sack or US$ 1.60 per bushel. The reasons for the low prices in Mato Grosso include: record large production, lack of storage capacity, low domestic demand, and ultra-high transportation costs to ship the corn out of the state to livestock producers or exporters in southern Brazil. Transporting the corn from northern Mato Grosso to end users in southern Brazil can cost as much as three dollars per bushel.

To counteract these low prices, the federal government has been aggressively purchasing corn in Mato Grosso through a series of auctions. At these auctions, they pay the producer the guaranteed minimum which is R$ 13.00 per sack or approximately US$ 2.90 per bushel. The government has already purchased 6.7 million tons of corn and they are contemplating additional auctions. Discussions are also taking place in Mato Grosso on the possibility of using the excess corn to produce ethanol either by using corn to make ethanol during the months of December, January, and February when sugarcane is not available or by building ethanol plants that only utilize corn.