July 8, 2014

Producers in Brazil want Government help in Marketing their Corn

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

The Association of Irrigated Agriculture in Bahia (Aiba) has petitioned the Brazilian Minister of Agriculture to start subsidizing the purchase of corn produced in the western part of the state under the Pepro Program because corn prices have fallen to below the minimum price set by the government. Farmers in Bahia planted a record 265,000 hectares of corn in 2013/14 and the total production is expected to be 2.4 million tons.

Western Bahia is the primary producer of corn for northeastern Brazil and the federal government has given incentives in recent years to increase corn production. The biggest incentive is the high minimum price of R$ 21.60 per sack of 60 kilograms or approximately US$ 4.46 a bushel. As a comparison, the minimum price for corn in Mato Grosso is roughly R$ 13.56 per sack or approximately US$ 2.80 a bushel.

The current corn price in Bahia is approximately R$ 17.00 per sack or R$ 4.60 per sack below the minimum (approximately US$ 1.00 per bushel). The government is willing to set a high minimum price for corn in the state because they would prefer that farmers grow the corn in Bahia as opposed to trucking the corn in from regions far away such as Mato Grosso.

Less than 50% of the corn produced in the state has been sold thus far and Aiba estimates that it would take R$ 100 million to make up the difference between the market price and the minimum price for the remainder of the corn left to be sold.

According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers in Mato Grosso are also facing corn prices well below the minimum set by the government. Currently, the price of corn in Mato Grosso is in the range of R$ 12.00 per sack (US$ 2.48 per bushel), which is below the minimum price of R$ 13.56 a sack (US$ 2.80 a bushel) and significantly below the cost of production for high technology corn which is R$ 18.00 per sack (US$ 3.72 a bushel).

As a result, the Soybean and Corn Producers Association of Mato Grosso (Aprosoja) has also petitioned the federal government to start the Pepro Program as quickly as possible. Aprosoja estimates that the corn production in the state will be 16.4 million tons and only 25% of the corn has been sold. They estimate that the government needs to allocate R$ 710 million for the Pepro Program in Mato Grosso.