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September 10, 2014

Farmers in Mato Grosso Slow Sellers of old Corn and New Soybeans

Farmers in Mato Grosso continue to be very slow in forward contracting their 2014/15 anticipated soybean production. The Mato Grosso Institute of Agricultural Economics (Imea) estimates that they have forward contracted 11% of their anticipated 2014/15 soybean crop.

The average price for these forward contracts during the month of August was R$ 41.22 per sack or approximately US$ 8.52 per bushel. These prices are significantly less than August of 2013 when the average price was R$ 47.76 per sack or approximately US$ 9.87 per bushel. The soybeans being contracted now will be delivered in March of 2015.

Farmers in Mato Grosso also continue to be slow sellers of their 2014 corn crop due to the low prices being offered for their corn. Imea estimates that up until the end of August, farmers in Mato Grosso have sold 51% of the 17.7 million ton 2014 corn crop. Last year at this time farmers in the state had sold 56% of a much larger corn crop (22.5 million tons). Therefore, farmers in the state have sold 9.0 million tons of corn thus far this year compared to 12.6 million tons last year.

The five year average of corn sales at the end of August has averaged 71%, but for most of those five years, corn prices were much higher than the current prices in the state.

Imea is now estimating the statewide average corn yield at 91.6 sacks per hectare (5,496 kg/ha or 84.6 bu/ac). At the start of the growing season Imea had initially estimated the corn yield at 81 sacks per hectare or 74.8 bu/ac.

The slow selling by farmers has actually resulted in a softening of freight rates in the state. There are a lot of trucks sitting empty in the state waiting to haul loads of corn to Brazil's southern ports. The cost of transporting corn from Sorriso in central Mato Grosso to the Port of Santos is now 16% cheaper than it was twelve months ago due to a lack of demand.

Many farmers in the state are also holding their corn while they wait for additional Pepro Program auctions in order to obtain the minimum price guaranteed by the government of approximately US$ 2.80 per bushel. During the month of August the federal government conduced two Pepro Program auctions during which 1.4 million tons of corn in the state was subsidized at an average rate of R$ 2.53 per sack or US$ 0.52 per bushel. A third Pepro Program auction is scheduled for September 11th during which another 1.5 million tons of corn in Mato Grosso will be subsidized by the government.