South America Calling

Brazil Farmers Forward Sell Second-Crop Corn

Brazilian farmers have seized on price peaks over the past two months to forward sell a fair chunk of their upcoming second-crop corn production.

Up to Dec. 31, they had sold 19% of projected 2014-15 second-crop output, which is much higher than the 2% sold at the same time last year and up from 11% at the end of November, according to AgRural, a local farm consultancy

While price is the main driver, AgRural notes farmers have an increased desire to fix 2014-15 crop costs after delaying sales almost led to disaster in 2013-14. Farmers held off on selling the last crop until post-harvest only to see prices slump once the crop arrived in August and were only bailed out by government intervention.

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Local prices for the crop, for which planting runs from mid-January to mid-March, have been attractive at various points over the last two months when peaks in Chicago futures coincided with troughs for the Brazilian real against the dollar. Alarmed by talk of dramatically falling second-crop corn area, buyers have passed on the full value of these gains to farmers.

In Mato Grosso, the No. 1 second-crop state, farmers had sold 31% of the 2014-15 crop until the end of last month, up from 2% at the same point last year.

In Nova Mutum, mid-north of the state, corn was quoted at R$16.50 per 60-kilogram bag ($3.00 per bushel) for August delivery. That's well above the R$11.00 offered in August 2014 and provides a small margin over costs, assuming average yields.

In Parana, the No. 2 second-crop corn state in the south, sales have been much slower. At the end of December, some 8% of the second crop had been sold, but that is still ahead of the 2% sold at the same point last year.

Over the last couple of years, corn has become more of a winter crop in Brazil, planted immediately after the summer soybean crop. In 2014-15, the Agriculture Ministry forecasts second-crop production will total 49.4 million metric tons (mmt), while first-crop summer corn output is pegged at 29.6 mmt.

Originally, market talk was of a significant decline in second-crop corn this season, mainly due to low prices that didn't cover costs but also because of the reduced planting window caused by delays to the summer soybean crop. But many farmers appear to have chosen to plant anyway as they need a winter cover crop and corn is the only grain have a chance of making money from.

AgRural forecasts center-south second-crop corn planting, which is just getting underway, will fall 6.4% to 19.0 million acres.

(AG)

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