Apr 22, 2010
Brazilian Government Will Start Buying Corn Starting In May
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian Minister of Agriculture announced that the first auctions to buy corn in the state of Mato Grosso should occur during the first half of May. Farm organizations have been demanding that something be done about the oversupply of corn in the state that is overwhelming the storage system in the state and driving down corn prices. While the minimum price for corn is set at R$ 13.98 per sack, the recent cash price for corn in Mato Grosso has been as low as R$ 6 to R$ 9 per sack.
Mato Grosso is expected to produce 9.5 million tons of safrinha corn in 2010 and there is still 3 million tons of government owned corn in storage across the state that is left over from 2009. Producers are still worried that if the auctions don't precede fast enough, the newly harvested safrinha corn will have to be stored on the ground. That is what occurred last year when 2.5 million tons of corn was piled outside. The safrinha corn harvest will start by the end of May and peak during July.
In 2009, the federal government purchased 7.1 million tons of corn in Mato Grosso over the course of 21 auctions.
The problem with producing corn in central Brazil is that the transportation costs of moving the corn to livestock producers in southern Brazil or to export facilities is prohibitive. That is where these government programs come in. The government buys the corn at a guaranteed minimum price and then absorbs some or all the transportation costs and resells the corn to the end users or exporters. According to Silvio Famese, the person in charge of the auction programs, the federal government is prepared to purchase 15 million tons of corn across the country in 2010.
The minimum price for corn in Mato Grosso in 2010 is R$ 13.98 per sack of 60 kilograms, which is slight more than the R$ 13.20 minimum in 2009.
The lack of storage space in Mato Grosso and the over-supply of corn was serious enough that it was on the top of the agenda for the new Minister of Agriculture, Wagner Rossi, who just recently assumed the post.