Apr 05, 2010
Lower Commodity Prices - More Bad News For Brazilian Producers
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Even before the release of the 2010 Prospective Planting Report on March 31st, Brazilian producers were reeling from the declining commodity prices for soybeans, corn and rice. After the release of the report and the subsequent sharp declines in commodity prices, the situation for Brazilian producers is now even worse.
According to data released on March 31st (before the release of the 2010 Prospective Planting Report) by the Agricultural Confederation of Brazil (CNA), in many parts of Brazil, the cash prices for soybeans, corn and rice were below the cost of production for those commodities.
Soybeans - Take for example the region of Londrina in northern Parana. During the month of January, when the cash price for soybeans was R$ 38.68 per sack, soybean producers in the region could have sold their soybeans for a profit of R$ 3.95 per sack. With the subsequent decline in soybean prices over the last three months, the cash price in northern Parana is now approximately R$ 4.02 per sack below the cost of production.
In Sorriso, located in central Mato Grosso, the cost of producing a sack of soybeans is estimated at R$ 29.94 but the selling price in March was approximately R$ 25.00. Prices were closer to the break-even point in January when the cash price was R$ 28.20.
Corn - The situation for corn producers in Brazil is worse than it is for soybeans and there is no indication that it will improve any time soon. In all the areas where CNA conducted their survey, the cash price for corn was below the cost of production.
One of the worst areas in Brazil for selling corn right now is in Primavera do Leste, which is located in southeastern Mato Grosso. CNA estimates the cost of producing corn in the region is R$ 17.13 per sack, but the current cash price is approximately R$ 10.00 per sack. The minimum price for corn in the region, which is guaranteed by the government, is R$ 13.95 per sack. In order to receive the minimum price though, the corn must be sold to the government and the government doesn't have enough resources to buy all the corn that the farmers want to sell. Farm organizations have been petitioning the federal government to start purchasing the corn as quickly as possible due to a shortage of storage space for the safrinha corn crop, which will be harvested over the next several months.
Rice - Rice producers in Rio Grande do Sul are also suffering under low prices and poor yields due to adverse weather back in November that delayed the panting of the rice crop. CNA estimates that the cost of production for a sack of rice (50 kilograms) is approximately R$ 29.45, but in some parts of the state, a sack of rice is selling for as low as R$ 26.50. In the parts of the state where the weather was not as much of a problem and the yields were better, producers have managed to eek out a small profit on their rice production. In Itiqui they are making a profit of R$ 2.82 per sack and in Cachoeira do Sul, their profits are R$ 1.96 per sack.
Brazilian soybean and corn producers remain slow sellers of their 2010-11 crops in the hope that adverse weather during the U.S. growing season might spur higher prices. If that does not happen, then it is expected that Brazilian producers will cut back even further on their full-season corn acreage in favor of more soybeans and that they will also cut back on inputs (fertilizers) for their 2010-11-soybean crop as a way to cut costs.