Mar 29, 2010
Storage Deficits Loom Large In Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The deficit of storage space in Brazil is already acute and it could get a lot worse in 2011. According to Jason de Oliveira Duarte, an agricultural economist with Embrapa, what is occurring now with the lack of storage space could be just the tip of the iceberg. Brazilian silos are already full of last year's corn and this year's record soybean crop and farmers continue to be slow sellers of both crops. The safrinha corn harvest is still two months away and there is already talk of having to pile the corn on ground due to lack of storage space. As bad as it is this year, it is possible that by mid-2011, Brazil will lack the space to store 20 million tons of grain.
With lack luster corn exports, the carry over of corn in Brazil continues to balloon. If the United States produces a good corn crop in 2010, Brazilian corn exports are expected to stay below projections and the corn carry over is expected to grow even larger. This abundant supply of corn has driven domestic corn prices to below the cost of production and the prices are not anticipated to improve any time soon.
The president of Brazilian Association of Corn Producers, Joao Carlos Werlang, believes that the low corn prices could result in even further reductions of full season corn production for the 2010-11 growing season. During this past growing season, farmers in Brazil cut back on their full season corn acreage 12% and still more cuts could be in the offing for 2010-11. The Brazilian government has even entertained the idea of reducing the guaranteed minimum price for corn due to the huge volume of corn the farmers want to sell to the government. Farm organizations are completely opposed to this idea saying you can't change the program just as farmers are harvesting their corn.
The solution to this dilemma of course is a long-term strategy to build enough storage to accommodate the ever-increasing grain production in Brazil. As with other infrastructure projects in Brazil, it remains to be seen if the government will take decisive action to resolve the problem