Jul 17, 2014

Corn Prices Slump to US$ 2.27 per bushel in Mato Grosso, Brazil

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

The Mato Grosso Institute of Agricultural Economics (Imea) recently released new higher estimates for the safrinha corn crop that is now being harvested in the state. They are new estimating the 2013/14 safrinha corn acreage in the state at 3.2 million hectares, which is up from their previous estimate of 3.0 million hectares. The total corn production in the state is now estimated at 17.1 million tons, up from their previous estimate of 15 million tons.

Good weather during April and May and an extended rainy season into June resulted in corn yields of 88.5 sacks per hectare (5,310 kg/ha or 81.7 bu/ac), which is higher than their previous estimate of 85.5 sacks per hectare (5,130 kg/ha or 79.0 bu/ac). Imea is estimating that 33% of the safrinha corn crop in the state has been harvested.

The good news concerning production is resulting in bad news as far as corn prices are concerned. Domestic corn prices in Mato Grosso have been falling on almost a daily basis and last week they averaged R$ 11.00 per sack or US$ 2.27 per bushel. The combination of harvest pressure and the anticipated record large corn crop in the United States have resulted in a price decline of 36% since the first of July.

Farm organizations in Mato Grosso, as well as in other Brazilian states, have indicated that government intervention will be essential to avoid significant losses for corn producers. The current market price in Mato Grosso (US$ 2.27 per bushel) is below the guaranteed minimum price set by the government, which is approximately US$ 2.80 per bushel.

Earlier in the year, it had been anticipated that farmers in Mato Gross would reduce their safrinha corn acreage by 15% due to low corn prices, but a surge in corn prices in March convinced many farmers to plant nearly all of their originally intended corn acres. Improved planting conditions during March also encouraged the late surge in corn planting. In the end, the safrinha corn acreage in Mato Grosso only declined 4% compared to 2012/13.

Conab is now estimating the total 2013/14 Brazilian corn production at 78.2 million tons which includes 32.0 million tons of full season corn production and 46.1 million tons of safrinha corn production. The safrinha corn crop now represents 59% of Brazil's total 2013/14 corn crop.