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October 1, 2018

More Corn will be consumed domestically in Mato Grosso

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

Farmers in Mato Grosso produce significantly more corn than what is consumed within the state resulting in the majority of the corn being transported to distant export facilities at a high cost. Since the corn production in Mato Grosso can be as far as 2,000 kilometers from export facilities, the cost of transporting the corn often times exceeds the actual price of the corn. The solution to this quandary is to increase the consumption of corn within the state and that seems to be what is happening.

Virtually all the corn in Mato Grosso is produced as a second crop following the harvest of the soybeans. A decade ago, approximately 30% of the soybeans planted in the state were followed by a crop of safrinha corn, but with the introduction of shorter maturity soybean varieties and shorter maturity corn hybrids, that percentage increased to 50% during the 2017/18 growing season, according to a study released by Rabobank last week.

In that study, Rabobank estimated that the percentage of soybeans followed by safrinha corn could increase to 60% by the year 2023. In 2018, approximately 4.6 million acres of safrinha corn were planted in Mato Grosso and that could increase to 6.9 million by 2023. The safrinha corn production in 2023 could be 43 million tons, which would surpass the amount of soybeans produced in the state.

Over the past five years, approximately 17% of the corn produced in the state was consumed within the state, which would equate to about 4 million tons. Rabobank estimates that in 2018, 5 million tons will be consumed domestically and by the year 2023, the domestic consumption could increase to 10 million tons.

The increased domestic consumption would come from increased ethanol being produced from corn and increased livestock production, especially cattle being placed in feedlots. The first corn-based ethanol facility in Brazil was inaugurated in Mato Grosso in June of 2017, and that facility is already undergoing an expansion that will double its capacity. Other corn-based ethanol facilities in the state are either under construction or in the final stages of planning.

One of the byproducts of corn-based ethanol production is the production of dry distillers grain or DDGs. This product can then be used in feedlots for beef production. The cattle herd in Mato Grosso is the largest in Brazil at approximately 30 million head and the DDGs from the ethanol mills could be used in the feedlots along with corn produced in the state. The corn could also be utilized in the expanding poultry and hog production in the state.

Farmers in the state welcome any opportunity to utilize more corn within the state as a way to support corn prices as opposed to trucking the corn to distant export facilities. When more ethanol facilities become operational in the state, Rabobank expects the increased demand will result in higher domestic corn prices. They estimate that ethanol production in the Midwestern United States adds approximately 10% to the price of corn (approximately $0.30 per bushel).