July 15, 2014

Brazilians looking for Gov. Help as Corn Prices fall to US$ 2.33 bu

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

Corn prices in Mato Grosso are currently below the minimum price set by the government and farmers are waiting for the federal government to step in with a new Prepo Program in order to subsidize corn prices paid to the farmers. Officials from the Minister of Agriculture have stated that any new Prepo programs will depend on coordination between the Ministry of Agriculture, the Internal Revenue Service, and the Brazilian Treasury as well as the overall financial situation of the country.

According to the Mato Grosso Institute of Agricultural Economics (Imea), the average price for corn in Mato Grosso is now R$ 11.32 per sack or approximately US$ 2.33 per bushel. These prices are already below the minimum price guaranteed by the government which is R$ 13.56 per sack or approximately US$ 2.80 per bushel. Additionally, these prices are significantly below the cost of production in the state which is estimated in the range of US$ 3.00 to US$ 3.50 a bushel.

The low prices are the result of harvest pressures in Mato Grosso and declining international corn prices in anticipation of a potentially record large corn crop in the United States.

According to Conab, in 2013 the Prepo Program in Mato Grosso subsidized the price of 8.86 million tons of corn at an expense of 450 million reals to the federal treasury. Unfortunately, a significant percentage of the 2013 Prepo payments have not yet been made according to farmers and specialists in the state.

Officials from the Ministry of Agriculture admit that there are late payments, but they attribute the late payments to the volume of auctions conducted in 2013 and the unorganized documents presented by some producers. They contend the late payments are not due to a lack of funds and it is just an operational issue, but others are not so sure.

Ministry officials have stated that they are in the process of obtaining funds for new Prepo auctions, but the dates and the amounts of the auctions are still being determined as well as the total resources that will be directed toward the program. The Prepo Program pays the farmers or the cooperatives the difference between the market price and the minimum price guaranteed by the government.