South America Calling

Brazil's second-crop corn harvest continues to progress, registering high yields, filling silos to the bursting point and depressing local prices.

Field work is now 56% complete across Brazil's center-west and southern grain belts, which is slightly slower than the 60% registered at the same point last year but still in good time, according to Safras e Mercado, a local farm consultancy.

In Mato Grosso, Brazil's main second-crop corn producer, excellent weather and increased investment in technology have resulted in record yields, which are averaging 99 bushels per acre, according to the Mato Grosso Agricultural Economy Institute (IMEA).

These excellent results prompted the Agriculture Ministry to last week raise its second-crop forecast to 45.1 million metric tons (1.78 billion bushels), up 15% on last year's bumper crop.

Now the problem is what to do with the corn.

With soybean shipments still running strong in July and early August, there is not yet much room at port for second-crop corn exports.

But there is also not enough room in the silos in Mato Grosso, which still stocks a sizable portion of its record soybean harvest. The state has a static grain storage capacity of 29.4 mmt, which is woefully inadequate for a combined soy and corn crop of 43.2 mmt.

With nowhere to put the grain, the trading companies aren't acquiring corn for nearby delivery, only accepting deals for October onward.

That's tough because farmers have a lot of corn to sell, not only because the harvest was larger, but also because they sold much less pre-harvest than last year. According to IMEA, forward sales totaled 43.3% at the end of July compared with 64.5% at the same time the year before.

Unsurprisingly, local prices continue to cede, falling to R$10 per 60 kilogram bag ($1.84 per bushel) in Sorriso, Mato Grosso, and R$18 per bag ($3.31 per bushel) in Cascavel, Parana, which is around 40% lower than last year.

One solution to avoiding the squeeze and increase storage capacity has been to use silo bags. Farmers in Mato Grosso have acquired these polyurethane plastic tubes in which grains can be stored for up to 12 months in volume to hold 2.4 mmt, according to the Mato Grosso Soybean and Corn Growers Association (APROSOJA-MT).

Still, much more corn will be stored in the open air.

The great hope for farmers in Mato Grosso and the other states of the center-west is that the government will buy up more corn.

Brasilia has already acquired 4 mmt of corn in Mato Grosso and will take up to 7 mmt this season.

It is offering to buy more but can't take delivery immediately for lack of silo space.

The government will seek to get rid of these stocks via exports later in the year. But subsidized exports in October, November and December will compete directly with U.S. output and serve to push international prices even lower, notes Paulo Molinari, corn analyst at Safras e Mercado.

Alastair Stewart can be reached at alastair.stewart@telventdtn.com

(AG)

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