Brazil’s 2006/07 Record Corn Crop
While Brazil’s corn area has been quite stable over the last decade, high world prices, largely influenced by increasing U.S. ethanol demand, are creating an invigorated interest in planting corn. Because the increase in corn prices did not occur until 2006/07 first-crop (summer) corn planting was underway in late 2006, summer corn area was relatively unaffected. Brazilian farmers, however, are currently planting more second-crop winter (“safrinha”) corn such that safrinha area has increased approximately 16 percent from last year. On average, winter corn accounts for 25 percent of Brazil’s total corn area and 23 percent of the total corn production. Winter corn planting should be nearly finished by the end of March.
Brazil’s 2006/07 corn yield prospects are quite favorable; USDA is currently forecasting a total corn yield of 3.6 tons per hectare, which is nearly 12 percent above last year. As of mid-March, summer corn harvest was especially advanced in Parana, Rio Grande do Sul and Mato Grosso do Sul. Reported yields have been above average due to optimal weather throughout the growing season in most of Brazil’s corn regions. Soybeans are being harvested ahead of normal in Mato Grosso despite wetness in some areas, which should result in earlier planting of winter corn (which follows soybeans), thus resulting in higher yield prospects for second-crop corn.
Above: Corn near harvest in Coffeelandia, Parana; high-yielding corn near Cascavel, Parana; and harvest underway in Coffeelandia, Parana.
Brazil’s largest summer corn producing states are Parana, Minas Gerais, and Rio Grande do Sul, which account for approximately 17, 14, and 11 percent, respectively, of the total corn crop. Parana also produces a sizable winter corn crop which accounts for nearly 8 percent of the total corn produced in Brazil; winter and summer corn together in Parana account for 22 percent of Brazil’s total corn crop, making Parana the largest corn producing state. The largest winter corn state is Mato Grosso, which plants winter corn after soybeans in a common rotation, comprising approximately 8 percent of Brazil’s total corn production.
Like rice, corn in the southern states is grown on smaller, older farms, and many farmers sell their grain to local cooperatives. In the Center-West and Northeast, where agricultural lands are newer, farm size is vastly bigger, infrastructure is far less developed, and farmers rely much more on multinational companies such as Cargill, ADM, Bunge, and Louis-Dreyfus to which they sell their corn. The southern states of Brazil account for most of Brazil’s summer corn production. Corn area in the South goes up and down depending on local consumption, which is mainly for the poultry, hog, and dairy industries. Specifically, western Parana is continually expanding poultry production, which is likely to continue into the next several years. The area of Castro and Castrolandia in Parana is the largest producing dairy area in Brazil, also creating a demand for corn.
High corn prices due to the US’s ethanol demand are influencing farmers to plant a bigger safrinha (winter) corn crop in the Center-West and may help to boost yield due to increased fertilizer sales. However, Center-West farmers face major challenges due to their geography. Located further from the main southern ports than the corn areas in the South, transportation costs remain high because of the distance covered to Paranagua and Santos. Farmers in the heart of the Northeast, who are still a significant distance from the main northern port of Sao Luis face a similar challenge. Poor infrastructure (e.g. few, narrow, and worn roads, and few railways) and high transportation costs remain prohibitive issues for Center-West and northeastern farmers who may consider planting more corn. Yet, if world prices are high enough, corn area is likely to increase in these areas and infrastructure improvements are apt to follow – that is if the exchange rate remains stable or becomes more favorable. For the time being in Mato Grosso, however, farmers continue to be more interested in soy and cotton than corn.
Some analysts believe the price of soybeans, in addition to corn prices, will dictate how much farmers fertilize the 2007/08 summer corn crop. While some farmers will able to maintain their fertilizer rates with help (in terms of credit) from their local coop, many summer corn areas witnessed a 30 percent drop in fertilizer use over the last 2-3 years as a result of a dire economic climate (e.g. poor prices and an unstable exchange rate in addition to a drop in yields due to dryness). Several Brazilian sources believed that if weather and prices continue to be good, next year’s fertilization rates will be back to the levels they were at 3 years ago. According to one cooperative in Parana, urea is typically applied at rates of approximately 300 kg/ha on corn.
Corn requires higher rates of fertilizer than soybeans and rice, thus increasing the relative cost of production of corn. One farmer near Araguaiana, Tocantins, said the cost of production for corn on his farm is approximately R$1600/ha while the costs of production for soy and rice production are R$1100/ha and R$900/ha, respectively. For corn he applies 500kg/ha of 8-28-16 fertilizer. The higher cost of production for corn, along with a historically lower demand for corn than for soybeans (i.e. beef in the Center-West is grass-fed and soybeans for export are more liquid), are the main reasons why there is less corn area compared to soybean area in the Center-West and Northeast of Brazil. If world corn demand continues to grow, however, a larger area of corn in these newer agricultural areas is likely to be witnessed. Brazil is currently the world’s third biggest corn exporter behind the US and Argentina, and is expected to export 5.5 million tons of corn in 06/07.
Current USDA area and production estimates for grains and other agricultural commodities are available on PECAD's Agricultural Production page or at PSD Online.