Oct 23, 2009
Brazilian Soybean Acreage May Increase As A Result Of Poor Quality Wheat
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Farmers in southern Brazil are eager to switch some of their full-season corn acreage into additional soybean production because domestic corn prices are currently below the cost of production. Large carryover supplies of corn and competition from feed-wheat continue to pressure domestic corn prices. The situation could get even worse for corn farmers in southern Brazil because the quality of Brazil's 2009 wheat crop continues to deteriorate. Nearly half of the 2009 wheat crop is expected to be of such poor quality that it will only serve as feed-wheat, which can be used to substitute for corn in livestock rations, thus making the corn situation even worse. Two thirds of Brazil's corn production is used for animal rations, so additional competition from feed-wheat could drive corn prices even lower.
As an illustration of just how bad the wheat quality is in southern Brazil, some feed mills are even refusing to accept the wheat for livestock rations. The whole wheat situation in Brazil is turning into a real headache for the federal government, which just announced a R$ 600 million program to help out the wheat producers and the wheat millers. In recent years, the government has set minimum prices for various commodities in Brazil and for wheat, its is set at R$ 530 per ton. The problem is that the current market price in southern Brazil is R$ 480 a ton. The just announced governmental program is designed to purchase the wheat from the farmers at the minimum price and then to auction off the wheat at prevailing market prices with the difference being picked up by the government.
For farmers in southern Brazil, the problems with wheat and corn illustrate once again that soybeans are their best option year in and year out.