Aug 16, 2010
Brazilian Government Continues to Assist Brazilian Corn Growers
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian government has spent a lot of money recently trying to support the price of corn for Brazilian farmers. The principal way they are doing this is through the Pep Program, which is the Premium for Storage of Products. Conab administers the program and they have held weekly auctions since May where they purchase corn from producers. The government also conducts another program called the Pepro Program or the Producer's Equalization Payment Program. Thus far the government has spent R$ 695 million on the Pep Program and R$ 5.9 million on the Pepro program.
Conab completed its tenth corn auction last week by purchasing 84% of the 1.23 million tons that were offered by producers. Since May, the government has purchased 10.63 million tons of corn through its Pep Program, which represents 87% of the corn that was offered for sale. This is equivalent to 18% of Brazil's total corn production and 50% of the safrinha corn crop. The center-west region of Brazil produces 60% of the safrinha corn crop and Parana produces 30% of the crop.
Much of the Pepro Program is focused in the eastern producing states of Bahia, Piaui, and Maranhao.
Commodity and industrial groups, which represent poultry and hog producers and processors, in the state of Rio Grande do Sul have also recently asked the government for help in controlling the cost of livestock feed. They are concerned about the recent increases in international corn prices and the potential impact their bottom line.
These programs, which were instituted after the spike in commodity prices in 2007, were designed to insure an adequate food supply within Brazil, but they have turned out to be very expensive subsidy programs for Brazilian farmers.