Aug 20, 2010
Domestic Corn Prices Not Encouraging for Brazilian Farmers
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Domestic corn prices in Brazil have increased 10% over the last 30 days, but that is not enough to encourage Brazilian farmers to plant more corn. In fact, just the opposite is expected to occur in 2010/11 growing season as farmers in Brazil continue to reduce their full season corn acreage in favor of additional soybean production.
In Mato Grosso for example, the cash price for corn is now in the range of R$ 7.35 to R$ 9.50 per sack of approximately US$ 2.00 to 2.50 a bushel. Even though these prices are up compared to last month, farmers are not selling their corn in the cash market preferring to sell their corn to the government at higher prices.
Conab has been conducting a series of weekly auctions under the PEP program where they buy corn from producers at a minimum price of approximately US$ 3.95 a bushel. Thus far, they have purchased 64% of the 2010 corn crop in Mato Grosso. The government is not expected to purchase all the corn produced in Mato Grosso leaving the farmers to sell the remainder of their production at prices that are below the cost of production.
In addition to low prices, farmers are also concerned about the development of La Nina and the long range forecast of below normal rainfall during the spring and early summer. The last La Nina, which occurred during the 2007/08 growing season, resulted in very dry conditions in southern Brazil which resulted in severely reduced corn yields. Corn planting in Brazil usually starts by the end of August, but farmers will not risk planting their corn until the soil moisture is adequate for germination. If springtime weather in Brazil does end up dryer than normal, then there would be even more incentive to reduce corn acreage and increase soybean acreage.
Mato Grosso farmers have finished harvesting all of the two million hectares of safrinha corn with the average corn yield in the state of 68.8 sacks per hectare or 63.5 bu/ac, which is lower than initial estimates due to the abrupt end of the rainy season in early April.