Jun 04, 2010
Cash Corn Prices Improving in Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The first auction of corn was completed successfully last week in Brazil with the Brazilian government purchasing nearly a million tons of corn. These auctions are scheduled to be held on a weekly basis over the next eleven weeks. The government needed to step in with these auctions because the cash price for corn in central Brazil was so low that no one was selling any of their corn. At its lowest point, cash prices had dipped to below US$ 2.00 a bushel. The minimum price the government is prepared to pay at these auctions is R$ 13.95 per sack or approximately US$ 3.95 a bushel.
The government had hoped that the auctions would help to prop up the cash price for corn and it appears to be working. In the state of Goias for example, the cash price for corn is approximately R$ 14.00 per sack or about US$ 4.00 per bushel. This is at least R$ 2 or 3 per sack above the cash price of just a month or two ago. While improved, farmers are still waiting for higher prices in the range of R$ 15 or R$ 16 per sack (US$ 4.25 to 4.50 a bushel) before they start to sell to the cash market.
In Sorriso, located in central Mato Grosso, the cash price for corn over the last two weeks improved from R$ 9 to R$ 12 per sack (US$ 2.57 to US$ 3.40 per bushel), but it's still less than the R$ 13.95 being offered by the government. Even though corn prices are improving, farmers in central Brazil are still very disappointed due to the low corn yields caused by an early end to the rainy season.
Members of the Brazilian Congress are already complaining about the high cost of these auctions and they are floating the idea of lowering the minimum prices the government is willing to pay for corn and other crops as well. Farm groups are pushing back of course saying farmers need these prices if they are going to stay in business.
The cash price for corn will be an important factor as Brazilian farmers make plans for the 2010-11 growing season. If it looks like corn prices will stay above the cost of production, Brazilian farmers will be less likely to continue switching some of their full-season corn production for additional soybean production. If corn prices continue to languish in Brazil, farmers in southern Brazil will likely continue switching some of their corn acreage for additional soybean acreage.