Dec 30, 2009
Brazilian Domestic Corn Market Pressured By Large Corn Stocks
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Even though Brazilian farmers cut back on their full-season corn acreage, the weather thus far during the 2009-10 growing season has been good and the corn yields are expected to be quite high. With disappointing corn exports and large domestic supplies, there are no immediate prospects for a rebound in domestic corn prices in Brazil. According to Conab, burdensome corn supplies will continue to pressure the corn market in Brazil unless exports ramp up in early 2010.
The 2008-09 corn crop in Brazil was hurt by dry weather in southern Brazil in early 2009, but the reduction in Brazilian corn production in 2008-09, 51 million tons in 2008-09 vs. 58 million tons in 2007-08, was not enough to significantly reduce the corn carry over within the country. The carry over stocks only fell from 12 million tons to 11.2 million tons. Brazilian corn exports in 2009 will close out the year with a 10% increase over 2008, but exports will end the year 12% below what had been expected at the start of 2009. A significant part of the problem with Brazilian corn exports has been the strengthening Brazilian currency, which makes Brazilian corn more expensive and reduces farmer incomes.
The resolution to this problem rests in the hands of the federal government. The Brazilian government guarantees farmers a minimum price for their corn and when the market price is below the minimum, the government purchases the corn from the farmers and sells it at a loss to domestic end-users or exporters with the government picking up the difference. This entire process is slow and cumbersome.
Mato Grosso farmers produced a record corn crop in 2009 and the government is still in the process of cleaning out the excess inventory. In fact, the co-ops and grain companies in Mato Grosso have been complaining to the government that they still have silos full of last year's safrinha corn crop at a time when they are expecting a record 2009-10 soybean crop. The soybean harvest has already begun in Mato Grosso, but the peak of the soybean harvest won't occur until late January. Between now and the end of January, the co-ops say that something needs to be done about last year's corn crop.
Due to loading problems at the Port of Paranagua in the state of Parana, the Port of Santos in the state of Sao Paulo has taken over as the leading corn export port in Brazil. In 2009, 3 million tons of corn moved through the Port of Santos as compared to 1.7 million tons that moved through the Port of Paranagua. Brazilian exporters have increased their corn sales to countries such as Chile, Columbia, Saudi Arabia, Algeria, South Korea, and Taiwan while some traditional customers such as Germany have purchased very little Brazilian corn in 2009.