November 30, 2017

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
15% of Corn Prod. Consumed within Mato Grosso, Goal is 50%

The 14th edition of Brazil's Safrinha Corn Seminar was held last week in the city of Cuiaba, which is the capital of Mato Grosso. The main theme of the meeting was how to add value to the safrinha corn produced within the state.

Mato Grosso is the largest corn producing state in Brazil, but their problem is not how to produce the corn, it is how to dispose of the excess corn inventory. During the last growing season, the state produced approximately 29 million tons of corn, but only about 15% of the corn was consumed within the state (a little more than 4 million tons). The remainder of the corn was shipped to livestock producers in southern Brazil or to export markets. Regardless of the destination outside of the state, the transportation costs greatly reduced any potential profit margins for corn producers.

Farmers had hoped that transportation costs could be lowered by shipping the corn north along highway BR-163 once it is completed to ports on the Amazon River. Unfortunately, the cost savings would not be as much as anticipated since the highway will be a toll road and the tolls will eat into the cost savings. Eventually, rail transport would be much cheaper, but it will be years before any new railroads will be constructed within the state.

The quickest solution to their problem of excess corn supply would be to consume more of the corn within the state either by the traditional livestock industry or by a new entry into the market - corn-based ethanol production. Between the two, it appears that ethanol production could be the one capable of scaling up the fastest.

Currently, there is only one corn-based ethanol facility up and running in the state. That facility utilizes 600,000 tons of corn annually. A second and larger facility capable of utilizing 1 million tons of corn annually is currently under construction. Company officials are scouting for locations within the state for additional corn-based ethanol facilities.

Additionally, several sugar mills in the state have been retrofitted to utilize corn to produce ethanol during the three months of the year when sugarcane is not available (December-January-February). Recently announced plans to build new "flex" sugar mills in the state will also be capable of utilizing corn whenever sugarcane is not available. Ideally, farmers in the state would like to see 50% of their corn production consumed within the state.

A longer term problem is the fact that even if a multitude of corn-based ethanol facilities were built in the state, resulting in stronger corn prices, farmers would probably continue to increase their safrinha corn production at an equally quick pace.

Currently, slightly less than half of the soybean acreage in the state is followed by a second crop of corn, but as scientists develop more high-yielding early maturity corn hybrids adapted to the cerrado region of central Brazil, farmers are poised to continue increasing their safrinha corn production.