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September 30, 2011

Farmers in Mato Grosso Contract Nearly 50% of 2012 Corn Prod.

Farmers in Mato Grosso have been very aggressive in forward contracting their 2012 safrinha corn production. With still five months to go before they even start planting their corn crop, they have already sold 45% of their anticipated production. In fact, they haven't even planted their soybeans yet and they are already selling the crop that they will plant after the soybeans are harvested.

The pace of selling is unprecedented making it difficult to make any type of comparisons with prior years. Due to the unpredictable nature of the safrinha corn production in Brazil, the earliest the farmers sold their corn in recent years was maybe two months before the crop was going to be harvested. The farmers were cautious because they can't forward sell too much before they know how much they are going to produce.

The fact that they have already contracted such a large percentage of their anticipated 2012 corn crop could be an indication that they might plant even more safrinha corn than currently expected.

Domestic corn prices in Mato Grosso are very good in the range of R$ 21.00 per sack or US$ 6 per bushel. That is the price in dollars if the exchange rate used to make the conversion is 1.8 Brazilian reals per dollar. Up until recently the exchange rate was about 1.55 Brazilian reals per dollar and at the current prices that would translate to US$ 6.75 a bushel. In southern Brazil corn prices are even better in the range of US$ 8.50 per bushel. Regardless of the conversion factor that is used, these are very good corn prices for Brazilian farmers.

Farmers in the western Mato Grosso municipalities of Sapezal and Campo Novo do Parecis have started to plant their 2011/12 soybeans. There have been some rains in the area and more are forecasted in the days ahead. Farmers are very anxious to get their soybeans planted as quickly as possible to allow enough time to plant their safrinha corn crop. The earlier the soybeans are planted, the greater the likelihood that farmers will increase their safrinha corn acreage above what is already expected.

If the safrinha corn is planted late, it is not uncommon for the yields to be reduced 50% due to adverse weather. In fact, that is what happened earlier this year when freezing temperatures in late June significantly impacted the safrinha corn crop in Parana and late planted safrinha corn in Mato Grosso was significantly impacted by the early onset of the dry season.