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May 2, 2017

Much of Mato Grosso's Corn Production will be Piled Outside

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

The safrinha corn crop in Mato Grosso, which is Brazil's largest safrinha corn producer, generally looks good and that is bad news for corn prices in the state. The current price of corn in the state is below the cost of production and below the minimum price of R$ 16.50 per sack (approximately $2.40 per bushel) set by the Brazilian government. Farmers in the state are worried that it could get even worse with prices falling as low as R$ 10.00 to R$ 11.00 per sack at harvest time (approximately $1.50 to $1.60 per bushel).

If prices do fall that low, it would only be temporary because farmers would prefer to store their grain rather than sell at such low prices and that could cause another problem - a lack of storage space.

The Mato Grosso Institute of Agricultural Economics (Imea) estimates that farmers in the state will produce 57.5 million tons of soybeans and corn, but the state only has 33.8 million tons of storage capacity resulting in a deficit of 35.5 million tons. The good thing in Mato Grosso is that the soybeans and corn are harvested at different times of the year. The soybeans are harvested from January to March whereas the corn is harvested from June to July.

According to the Mato Grosso Institute of Agricultural Economics (Imea), farmers in the state have sold 43% of their anticipated corn production comparted to 82% sold last year at this time. Farmers were very aggressive sellers last year because domestic corn prices were at record high levels. In fact, some farmers were too aggressive because adverse weather left some farmers without enough corn to fulfill their contracts which had to be renegotiated. It ended up being a very expensive proposition and as a result, farmers have been much more cautious in their forward selling this growing season.

With many silos still full with the recently harvested soybeans, the storage deficit in the state is going to be painfully obvious over the next few months. As a result, there are going to be mountains of corn piled outside all across the state. The corn will be piled outside during the dry season when there is little chances of rainfall, so that is good.