Aug 27, 2014

Second Pepro Corn Auction in Brazil Scheduled for August 28th

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

Farmers in Mato Grosso have wrapped up the harvest of their 3.2 million hectares of safrinha corn according to reports released by the Mato Grosso Institute of Agriculture Economics (Imea). Imea reported that the corn price in Mato Grosso last week averaged R$ 11.62 per sack (approximately US$ 2.35 per bushel), which was unchanged from the week before.

Last week the first Pepro Program auction was held in Brazil where the federal government subsidized the price of 896,000 tons of corn in Brazil (808,000 tons of corn was from Mato Grosso). The average subsidy in Mato Grosso was R$ 2.18 per sack (approximately US$ 0.45 per bushel). This is the difference between the local price and the minimum price set by the government which is approximately US$ 2.80 per bushel.

The next Pepro Program auction is scheduled to be held August 28th for a total volume of 1.75 million tons of corn. Most of the corn will be from Mato Grosso, Goias, and the northern part of Mato Grosso do Sul, but this auction will also include corn from western Bahia, southern Maranhao, and southern Piaui. Of the 1.75 million tons of corn, 1.45 million tons will be from Mato Grosso.

Everyone uses the term "auction" for this program, but it's not really an auction in the true sense of the word. The Brazilian government does not purchase the corn, it simply pays the difference between the local domestic price and the guaranteed minimum on the day the corn was sold. Farmers who participate in the auction scheduled for August 28th must sell the corn by October 2nd and documentation attesting to the sale must be filed with Conab by February 24, 2015.

In theory, payment for the difference in price would then be forthcoming shortly after the documents are submitted, but many farmers are still waiting for payments from auctions conducted a year ago.