Apr 14, 2010
Farmers In Mato Grosso Plant 19% More safrinha Corn
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The safrinha corn acreage in Mato Grosso increased 19% in 2010 compared to 2009 and the total safrinha corn production is estimated at 9.5 million tons, which is 1.0 million tons more than last year. In 2009, 2.5 million tons of corn had to be stored on the ground due to a lack of storage space and that may have to be repeated again this year if the safrinha corn crop lives up to expectations. The excess of corn in Mato Grosso has resulted in very low corn prices in the state. This raises two questions, why are they planting more corn when the domestic price of corn is below the cost of production in virtually all regions of Brazil and what are they going to do with all the corn?
The answer to the first question is government subsidizes. The safrinha corn crop continues to expand in Brazil for two reasons. First, corn is the best alternative for a second crop following soybeans and secondly, the government is guaranteeing a relatively good minimum price for corn. Planting a second crop of corn is also a good way to increase your cash flow without having to invest a lot of resources in clearing new land. It only involves planting more early maturing soybeans, which allows for the planting of a second crop of corn.
Various estimates put the cost of producing safrinha corn in Mato Grosso at between R$ 12 to R$ 15 per sack. The cash price for corn in Mato Grosso right now is about R$ 7 to R$ 9 per sack depending on location, which is 30-40% less than in 2009. The minimum price of corn, which is set by the government, is R$ 13.95 per sack and the farmers in the state are anticipating selling most of their corn to the government at the minimum price. In 2009, the government purchased approximately 75% of the corn produced in Mato Grosso.
Without the minimum price guarantee, no one would risk growing a second crop of corn. safrinha corn production is already a risky proposition due to the possibility of adverse weather and if you knew ahead of time that the cash price was going to be significantly below the cost of production, why would you plant the crop? As long as the price guarantee remains in place, farmers in central Brazil will continue to increase their safrinha corn acreage. In fact, the Minister of Agriculture released a study recently indicating that the safrinha corn crop in Mato Grosso could double in size over the next ten years.