Oct 30, 2009
Potential Storage Bottleneck Developing In Mato Grosso
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Soybean farmers in Mato Grosso are worried that a potential storage bottleneck may be developing in the state. A lack of storage capacity is always a concern in Mato Grosso, but this year may be worse than normal due to a big carryover of the safrinha corn crop that is still in storage coupled with an extra early start to the 2009-10 soybean crop.
Mato Grosso producers will end this year with 1.85 million tons of corn still in storage - 1.0 million tons left over from the 2008-09 safrinha crop (Mato Grosso produced 7.5 million tons of safrinha corn in 2009) and 0.85 million tons still left over from the 2008 safrinha corn crop. Farmers have been very slow to sell their corn because of the depressed domestic prices and the high cost of moving the corn to other parts of Brazil, where the corn is needed. The Brazilian government has set the minimum price for corn in Mato Grosso at R$ 13.20 per sack of 60 kilograms compared to a cost of R$ 12.00 per sack to produce the crop, thus guaranteeing a small profit for the producer. Currently, corn prices in southeastern Mato Grosso (Rondonopolis) are R$ 10.50 a sack and in central Mato Grosso (Sorriso) corn is selling for R$ 8.00 per sack, both well below the cost of production.
The government can offer the farmers a minimum price for their product by purchasing the corn from the producer and they auctioning it off to end-users, with the government picking up the difference. The problem is that the government has been slow to conduct these auctions and the silos are still full of corn with the impending soybean harvest starting in little over two months. If the silos are still full of corn by the time the soybean harvest begins, it might force the farmers to sell their soybeans quicker than they would normally. Soybean farmers in Mato Grosso will certainly be harvesting their new crop of soybeans by mid-January.
In recent years, the farmers in Mato Grosso have managed to increase their corn producing capacity faster than the growth of the livestock industry in the state. When the corn pries were higher, they could afford to ship the corn to other areas of Brazil and still make a profit, but with the current price of corn below the cost of production, the farmers must wait for the government to auction off the corn in order to receive the minimum price. The Department of Agriculture in Mato Grosso has been trying to encourage more poultry and hog production in the state in order to utilize more of the state's excess corn crop. They have even gone so far as to suggest using the excess corn production to make alcohol, but that proposal probably won't get off the ground.