Jul 14, 2010
Safrinha Corn Harvest in Parana Depresses Domestic Corn Prices
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The safrinha corn harvest in Parana is 20% complete and as the harvest pace accelerates; the excess corn in the marketplace has depressed prices and convinced most farmers to hold onto their corn in hopes of better prices in the future. Only 5% of the anticipated safrinha corn production in the state has been forward sold as farmers opt to store the crop. Additionally, Parana farmers are still holding onto 40% of their full season corn production as well. There is already 4.5 million tons of corn in storage in the state and that may double before the end of the safrinha harvest. The lack of storage space in the state is going to get worse before it gets better.
In Parana, the growing season has been very good for the safrinha corn crop which is expected to yield 5.8 million tons. If verified, that would be 32% more than the drought plagued 2009 crop and just slightly shy of the record production set in 2008.
As a result of the over-supply, corn prices in Parana, which is the number one corn producing state in Brazil; have stagnated all across the state. According to State Secretary of Agriculture, the average price for corn in the state is R$13.20 per sack or approximately US$ 3.75 per bushel. The lowest corn prices in Parana are found in the city of Campo Mourao where a sack of corn is now selling for R$ 12.60 or just US$ 3.60 a bushel. This is approximately equal to the variable cost of growing the crop not counting depreciation or land costs.
As low as the prices are in Parana, corn prices in the state are some of the highest of any major producing states due to lower transportation costs. Parana farmers are lucky to be located next to the Port of Paranagua which is the largest corn exporting port in Brazil. Cash prices for corn in central Brazil are significantly lower due to the higher transportation costs.
If corn prices remain depressed in southern Brazil, farmers in the region could once again opt to plant less full season corn and more soybeans, especially if soybean prices continue to strengthen.