Apr 11, 2022

High Corn Prices Jeopardize Santa Catarina Livestock Producers

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

The 2021/22 growing season in the state of Santa Catarina in southern Brazil was full of problems. A severe drought and record high temperatures resulted in corn loses of 50% and soybean loses of 30%. The poor 2021/22 corn production came after a disastrous 2020/21 crop leaving livestock producers in the state facing a lack of corn for their livestock and very high corn prices.

According to the Agriculture and Livestock Federation of Santa Catarina (Faesc), the state was expected to produce 3.0 million tons of corn in 2021/22, but only 1.5 million tons were produced. The soybeans were expected to produce 2.8 million tons, but only 2.0 million tons were produced.

Santa Catarina is the largest hog producing state in Brazil and the second largest poultry producer and the state always runs a deficit as far as corn is concerned. The livestock industry in the state consumes 7 million tons of corn annually and now they will have to import 6 million tons of corn.

Most of that imported corn comes from the safrinha corn produced mainly in the central Brazilian states of Mato Grosso and Goias. The corn is trucked into the state sometimes from as far away as 2,000 kilometers at a very high cost. Those costs are now even higher with rising fuel prices.

The safrinha corn produced in central Brazil will not be available until sometime starting in June, so in the meantime, corn will have to come from neighboring Argentina. The large meat exporters in the state can afford the higher cost of Argentina corn to keep their operations up and running, but the small independent producers do not have the wherewithal to pay for the higher priced Argentina corn.

The cost of production for independent hog producers in the state is currently R$ 8.50 to R$ 9.00 per kilo, but the current price for hogs is R$ 4.50 to R$ 4.70 per kilo. In other words, the current price covers about half the cost of production and independent farmers are losing $72 to $76 per hog.

Many smaller and independent producers cannot afford to sustain these types of losses and they are temporarily abandoning hog production. The situation will only start to improve if Brazil producers a large safrinha corn crop, but even then, exporters will compete with livestock producers for available corn supplies due to the high international corn prices.