South America Calling

Potential for Brazil Corn Yields to Grow 30% to 40% - McKinsey

Brazilian corn production has grown dramatically over the last decade, allowing it to consolidate its position as No. 2 exporter.

It still registers poor yields compared with the United States but it has the potential to partially bridge that gap and increase per acre production by 30% to 40%, according to a study by McKinsey, an international consultancy, published in Valor Economico, a local business daily.

Based on current output, that would mean an extra 30 million to 45 million metric tons of corn.

Brazil always talks of logistical bottlenecks but that doesn't mean there isn't potential to harness on the farms, Nelson Russo Ferreira, McKinsey's head of agribusiness for Latin America, told the paper.

Average Brazilian corn yields are 84 bushels per acre, or roughly half those in the U.S. While American soils and climate better favor corn, it is reasonable to imagine Brazil can cut that difference, McKinsey said.

McKinsey teamed up with ConScience Analytics to look at potential of second-crop corn planting in Mato Grosso.

It discovered that through mechanization, the use of new GM technologies and improved access to credit, farmers could realistically expect a yield gain of 30 to 35 bpa, or an increase of about a third on current levels.

These gains could be captured over a period of three to five years.

Obviously, yield improvements would help margins and also make Brazil more competitive on international markets.

Second-crop corn yields have already increased dramatically over the last decade after farmers discovered that hi-tech hybrids and fertilization brought returns on what started as a cover crop.

McKinsey says they can take this a stage further.

When double cropping there are always trade offs. McKinsey argues that those could potentially be diminished. Of course, that is often easier said than done.

Traditionally,  second-crop corn is very much a secondary crop with spending comensurate with the smaller margins. But if margins are decent, as they promise to be this year, and the market for winter crop corn becomes more liquid and more sophisticated, as it has done in the last two years, then farmers will prioritize the crop more.

Last year, Brazil planted 39.0 million acres of corn, 23.7 million acres of which was second-crop corn.



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