Jun 26, 2014

Domestic Corn Prices in Brazil Continue to Decline

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

As the safrinha corn harvest gets underway in Brazil, domestic corn prices continue to decline. The safrinha corn harvest is 5% complete in Mato Grosso (160,000 hectares of the 3,000,000 hectares have been harvested), which is the largest producer, and it is 2% complete in Parana, which is the second largest producer. The early harvest in Mato Grosso has been slow due to the high grain moisture caused by the extended rainy season.

According to the Mato Grosso Institute of Agricultural Economics (Imea), domestic corn prices in the state fell 11% last week to an average of R$ 14.56 per sack or approximately US$ 3.00 per bushel. Corn prices are expected to go even lower due to increased harvest pressure in Brazil and the prospects of a good corn crop in the United States.

IMEA is now estimating that the average corn yield in the state might be as high as 94.5 sacks per hectare (87.3 bu/ac), which would represent a significant improvement over their prior estimate of 87 sacks per hectare. If verified, the total corn production in the state could be a million and a half tons more than the current estimate of 15.5 million tons.

The domestic price of corn in the state of Parana has also fallen in recent weeks. During the month of March the average price of corn in the state was R$ 23.00 per sack (US$ 4.75 per bushel), but by last week the price had declined to below R$ 20.00 per sack (US$ 4.10 per bushel).

The price of corn in Mato Grosso is currently at the break-even point and farmers are worried that further declines could put them in the red as far as their corn production is concerned. They have already petitioned the federal government to step in and start purchasing corn as a way to support corn prices. In 2013, the federal government purchased millions of tons in Mato Grosso at a guaranteed minimum price of R$ 13.00 per sack and then subsidized the transportation of the corn to livestock producers in southern Brazil and exporters in southeastern Brazil.