Jul 14, 2016

Strong Prices should encourage more Corn Acreage in Brazil

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

Domestic corn prices in Brazil reached record highs earlier in 2016, but they have since declined significantly due to harvest pressure. The domestic corn prices in Brazil are not expected to stay down for very long. In fact, the future prices are already starting to move higher and that should encourage more full-season corn acreage and more safrinha corn acreage.

Farmers in southern Brazil are expected to increase their full-season corn acreage for the first time in a decade. Last year farmers planted 3.18 million hectares of full-season corn in the center-south region of Brazil. As a comparison, farmers in the center-south region of Brazil planted 28.79 million hectares of soybeans last year, or 9 times more soybeans than full-season corn. Therefore, a 10% increase in full-season corn acreage would only equate to an additional several hundred thousand hectares of corn.

A big increase in full-season corn acreage is not a "done deal" because full-season corn competes with soybeans for acreage in southern Brazil and soybean prices are strong as well. Another hurdle for full-season corn is the lack of available credit in Brazil. Banks and the federal government are cutting back on credit, which is forcing farmers and suppliers to do more bartering for the needed inputs. Corn is much more expensive to plant than soybeans, so it remains to be seen just how much the full-season corn acreage will expand in southern Brazil.

The bigger increase in acreage will be for the safrinha corn crop. Last year, Brazilian farmers planted 9.53 million hectares of safrinha corn and that is expected to increase by as much as 10% in 2017. A lot of things could still impact the safrinha corn acreage in 2017 such as: a potential delay in planting due to delayed soybean planting, lack of available credit, outstanding debts from the decreased 2016 crop, and of course the weather.