Jun 28, 2018

Corn Deficits Worry Livestock Producers in Southern Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The state of Santa Catarina in southern Brazil is the largest producer and exporter of pork in Brazil and the second largest poultry producer. One of the biggest obstacles that livestock producers face in the state is that the farmers in the state cannot produce enough corn to meet the needs of the livestock industry.

The state generally produces approximately 3 million tons of corn per year, but the livestock industry consumes approximately 7 million tons annually. Most of the 4 million tons of corn needed to make up the difference is brought in from the states of Mato Grosso, Goias, and Mato Grosso do Sul.

Corn brought into the state comes from a very long distance and it all must come by truck since there are no railroads or rivers that connect the producers with the consumers. The distance from central Mato Grosso to western Santa Catarina can be as much as 2,000 kilometers and the transportation cost could be as much as $2.50 per bushel or more.

Competition for available corn supplies in Brazil has increased in recent years, which is bad news for livestock producers. Livestock producers now must compete with exporters, ethanol producers, and new ports opening up on the Amazon River and in northeastern Brazil.

The new and growing trend in central Brazil is to use corn to make ethanol. There is one corn-based ethanol facility operational in Mato Grosso, which is currently being doubled in size. There are numerous other corn-based ethanol facilities either under construction or on the drawing board. Additionally, numerous sugar mills in central Brazil have been retrofitted to utilize corn to make ethanol when sugarcane is not available. All this means more competition for available corn supplies, which is bad news for livestock producers in southern Brazil.

According to the Brazilian Association of Animal Protein (ABPA), the state will lose its competiveness if it cannot improve the logistics of getting corn into the western part of the state. One alternative source of corn could be from neighboring Paraguay.

Corn produced in southern Paraguay could be trucked across the Province of Misiones in northeastern Argentina to the city of Dionisio Cerqueira in western Santa Catarina on the border with Argentina. There are custom facilities at the border and Brazil, Argentina, and Paraguay have already agreed upon rules to move the corn across Argentina.

The distance from southern Paraguay to the border with Santa Catarina is approximately 350 kilometers and to the city of Chapeco, which is the heart of hog production in the state, is approximately 550 kilometers. The distance from Paraguay to western Santa Catarina is a fraction of the distance from Mato Grosso which means transportation costs could be reduced as much as 75%.

The state already imports corn from Paraguay but by a longer route through the city of Foz do Iguacu in the state of Parana, thus avoiding Argentina. Currently, Paraguayan farmers do not produce enough corn to meet all of Santa Catarina's needs, but corn production is expected to increase in the years ahead.

Other ways to minimize the effect of the corn deficit would be to increase the yields of the corn produced in the state, invest in more grain storage, invest in railroads to bring in the corn from central Brazil, use other grains such as wheat and barley for animal feed, and to import corn from Paraguay, Argentina, or even the United States if needed.