South America Calling
Alastair Stewart South America Correspondent

Tuesday 07/30/13

Big Corn Harvest Challenges Brazil's Farmers

SAO PAULO, Brazil (DTN) -- Brazilian corn farmers are stressed.

In July, there was 1.5 million metric tons of second-crop corn named for shipment from Brazilian ports, according to Safras e Mercado, a local farm consultancy, but up until last week only 410,000 mt had been shipped. (DTN photo by Alastair Stewart)

Last year, they enjoyed handsome margins on their bumper second-crop corn, but the outlook is very different this season.

With the harvest nearly 40% complete, the second crop looks to be even bigger than last year -- at around 45 million metric tons (mmt) in the center-south compared with 38 mmt -- but prices are much lower.

The situation is most dramatic in Mato Grosso, Brazil's biggest grain state, where the costs of the country's logistical shortcomings are most pronounced.

Corn was quoted at 8.80 Brazilian reals per 60-kg bag ($1.64 per bushel) last week in Sapezal, western Mato Grosso, 60% lower than the same time last year and well below breakeven. The drop is due to a toxic mix of two-year lows in Chicago on the promise of a large U.S. crop, abundant local second-crop production and the logistical bottleneck that makes it 20% more expensive to send corn to port from Sapezal than at the same time last year. That's a disaster as farmers had only sold a small proportion of the crop before harvest.

The situation will only get worse as only half of the Mato Grosso crop has been collected.

The only hope for the better prices in Mato Grosso is government intervention. Brasilia has held auctions to buy second-crop corn in Mato Grosso, committing to buy 4 mmt so far.

But those government purchases are just a drop in the ocean. Brazil will produce around 82 mmt of corn from the summer and second crop, planted after soybeans, up 13% on last year.

One option will be to export. Last year, Brazil shipped 22.3 mmt, temporarily becoming the world's No. 1 shipper after making inroads into traditional U.S. export markets such as Japan.

Brazil hopes to repeat that performance this year but logistical obstacles make that tough.

In July, there was 1.5 mmt of second-crop corn named for shipment from Brazilian ports, according to Safras e Mercado, a local farm consultancy, but up until last week only 410,000 mt had been shipped.

The delays are due to a soybean export backlog, which will force Brazil to compete hard with U.S. farmers to ship corn later in the year.

Brazil will find it tough to ship the 2.5 mmt a month necessary between August and January to match last season's export tally, according to Paulo Molinari, the Safras e Mercado corn analyst.

Even if they manage to hit last year's number, Brazil will still have another 10 mmt in corn stocks to deal with, he added.

Predictably, the gloomy outlook has turned farmers sour on corn and analysts expect planting to decline next year.

On Monday, Safras e Mercado forecast 2013-14 planted area would fall 10.1% to 13.0 million acres in the center-south region. Second crop area would also likely drop, by 6.2% to 18.5 million acres.

Alastair Stewart can be reached at alastair.stewart@telventdtn.com

(AG)

Posted at 4:43PM CDT 07/30/13 by Alastair Stewart
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