A retreat in crop prices, encouraged by a shortage of storage for the safrinha harvest, is prompting farmers in Brazil’s top grain-growing state to pullback on crop sales to their slowest in years.
Growers in Mato Grosso, Brazil’s top producer of crops including corn, cotton and soybeans, slowed sales of outstanding soybeans from the 2021-22 soybean harvest to 3.6% of crop over the past month, taking the total marketed to 82.2% – the slowest in at least six years.
For the 2022-23 crop, as will be planted from September, the amount of the expected crop priced over the month fell below 1.0%, to take the total marketed to 34.6% – down 9.2% year on year.
For cotton, the proportion of the Mato Grosso 2021-22 crop, as currently being harvested, at 78.0%, is also the slowest in at least six years.
The 79.9% of the 2021-22 safrinha corn crop, which is also mid-harvest, priced so far is not only by a distance beyond the range of the past five years, but well adrift too of the average of 75.9% typically marketed by now.
Farmers’ greater reluctance reflects in part “caution” over crop size, Imea said, after growers were caught out last year by drought damage to safrinha corn and cotton.
Furthermore, the “high levels” of fertilizer prices is also deterring harvest sales, in a country where nutrient supplies are often priced by growers in crop terms.
However, the institute also stressed the importance of falls in crop values in deterring sales, after steep declines in benchmark US-traded futures contracts, amid pressure from the northern hemisphere southern harvest and Brazil’s safrinha harvest, as well as growing economic worries and rising interest rates.
Chicago’s best-traded December corn contract is down by nearly 13% over the past month, with the November soybeans down by nearly 11%, while New York December cotton has plunged by 24%.
While weakness in the real against the dollar has protected local prices somewhat against declines in dollar values, Mato Grosso values have still fallen sufficient to deter grower sales, Imea noted
In cotton for instance, for which 2022-23 sales “had been showing expressive monthly advances, due to the attractive price”, the hedging spree “had its rhythm impacted by the devaluation in the price of fibre in the New York stock exchange.
“Uncertainties regarding the global economy, which directly affect consumption and the price of fibre, are factors that may continue to interfere with the pace of negotiations in the coming months.”
‘Stored in open-air piles’
For corn too, Imea highlighted the knock-on effect from the “drop in prices” in Chicago, besides pressure from Mato Grosso’s own harvest supplies coming onstream – a factor which some other commentators have flagged spurring large pressure on prices given a lack of space to store the crop.
In Colider, in northern Mato Grosso, prices have fallen to R$55-56 per sack, equivalent to about $4.90-5.00 per bushel, compared with the $75-80 per sack achieved by growers who forward sold corn, said Dr Michael Cordonnier, the respected South America crop analyst.
While prices “are expected to rebound in the months ahead… farmers would only be able to take advantage of the higher prices if they could store their corn on-farm,” he said.
“One of the concerns farmers now have is where to store the corn. A lot of the silos are still full of soybeans, so a large volume of corn is currently being stored in open-air piles.”
Mato Grosso has grain storage capacity of 39.2m tonnes, according to official crop bureau Conab, which pegs the state’s combined 2021-22 corn and soybean output alone at more than 82m tonnes.
Dr Cordonnier noted that increased grain storage “was one programme emphasised in Brazil’s annual Plano Safra”, an annual agricultural investment programme, as unveiled two weeks ago.
The plan unveiled R$5.1bn available at 7% interest for construction of stores holding up to 6,000 tonnes, and 8.5% interest for bigger units.