July 28, 2014

Brazilian Corn Farmers Petition Government for Price Assistance

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

Farmer organizations in four different states in Brazil (Mato Grosso, Goias, Bahia, and Maranhao) have already petitioned the Brazilian Minister of Agriculture to start immediately planning on conducting Prepo Program auctions so that farmers can receive the guaranteed minimum price for their corn. The minimum price varies by region and in Mato Grosso it is R$ 13.56 per sack (approximately US$ 2.80 per bushel). The current market price for corn in central Mato Grosso is approximately US$ 2.25 a bushel. The minimum is usually higher in regions where there is a greater corn deficit as a way to stimulate corn production.

In response, the Minister has indicated that they currently do not have the funds to conduct the Pepro Program but that he is scheduled to meet with the Brazilian Treasury Sectary this week to arrange for funding. The government still has not made all the payments for last year's Pepro Program and there are doubts if there will be adequate funding for a robust program this year.

Farmers in Mato Grosso do Sul are in the midst of harvesting their corn and they are not only worried about low corn prices but also about a lack of space to adequately store their corn. According to a report from Global Rural, farmers in the municipality of Sao Gabriel do Oeste located in northern Mato Grosso do Sul are expecting very good corn yields this year averaging 85 sacks per hectare (78.5 bu/ac) with some as high as 120 sacks per hectare (110 bu/ac).

Most of this bumper corn crop will have to be stored in the open air due to a lack of storage space. Farmers in the municipality planted 80,000 hectares of safrinha corn and are expecting to harvest 6.5 million sacks of corn. Unfortunately, there is only enough permanent storage capacity in the municipality for 30% of the anticipated production. The rest will have to be piled on the ground.

Even though a year ago the Brazilian government established a program of low interest loans to construct grain storage facilities, most farmers have not been able to receive any of the money as yet. Bureaucratic delays and required environmental permits have slowed the initial start of the program. The program is supposed to loan out R$ 5 billion per year for five years for a total of R$ 25 billion. If all the funds are eventually loaned out, it would go a long way to alleviating the chronic lack of grain storage in Brazil. Unfortunately, during the first year of the program only a small percentage of the funds have actually been allocated.