May 11, 2010
Low Temperatures and Low Prices Impact Brazilian Corn
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Recent cold temperatures in southern Brazil could slow the development of the safrinha corn crop in northern Parana. The temperatures Sunday night in parts of southern Parana fell to as low as 3 degrees centigrade with patchy frost being reported. No frost was reported in northern Parana where the safrinha corn is grown, but the low temperatures slowed the development of the crop at a time when vegetative development needs to move forward as quickly as possible. The slower the safrinha corn develops, the higher the probability that the corn could be further impacted by even colder temperatures over the next two months. The below normal temperatures are expected to remain in southern Brazil until Wednesday or Thursday.
While it remains to be determined just how big the safrinha corn crop will eventually be in Brazil, the full-season corn crop did very well and as a result, Brazil's domestic market is over supplied with corn. The abundance of corn has resulted in cash prices for corn in Brazil to fall to very low levels. The two largest corn producing states in Brazil are Parana and Mato Grosso and these two states account for 40% of Brazil's total corn crop. The cash prices for corn in these two states have fallen to below the minimum price set by the government.
In Parana, the minimum price for corn set by the government is R$ 17.46 per sack (approximately US$ 4.95 per bushel), but the cash price in Maringa last week was R$13.07 per sack (approximately US$ 3.70 per bushel). In Mato Grosso, the minimum price set by the government is R$ 13.98 per sack (US$ 3.95 per bushel), but the cash price in Sorriso last week was R$ 8.00 per sack (US$ 2.27 per bushel).
These low corn prices mean that farmers will likely sell the vast majority of their corn to the government provided that the government has enough funds to purchase the corn. The government has said that they intend to purchase 15 million tons of corn in 2010 at the minimum price, but no corn has been purchased as yet. If cash prices don't improve and if there is a delay in the government's purchases of the corn, farmers in southern Brazil will likely reduce their full season corn acreage once again during the 2010-11 growing season in favor of additional soybean production.