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Brazil's farmers keep faith with safrinha corn, despite dismal harvest

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Elevated corn prices in Brazil are provoking ideas that farmers will maintain sowings even of safrinha crop for 2016-17, despite the dismal performance of their last harvest.

Even some three months before the start of sowings of the safrinha corn, which typically comprises some two-thirds of Brazil's overall output pf the grain, expectations are growing that farmers will leave plantings largely unchanged.

While Conab, the official Brazilian crop bureau, in its first estimate for the harvest last week kept the safrinha sowings figure steady year on year on year, that is part of its methodology so early before the seedings window, and is not considered an accurate forecast.

However, there are some more concrete signs that farmers have indeed not been deterred from the crop, despite a 25% tumble in safrinha production from the latest harvest, as dryness slashed the average yield by 32% to 3.88 bags per hectare.

'High prices'

Farmers in Mato Grosso, Brazil's largest corn-producing state, are expected to maintain their safrinha corn acreage unchanged from last year at 2.24m hectares, according to Imea, the Mato Grosso agricultural economics institute.

In Mato Grosso, safrinha corn is typically planted as a follow crop to the soybeans which are being sown now, and are harvested early in the calendar year.

It is also the main source of corn supplies for Brazil's exports.

"A shortage of corn has led to high prices," said Stefan Vogel, head of agri commodity markets research at Rabobank, meaning that farmers will "continue to plant corn".

High prices

Brazilian corn is fetching R$43.03 per 60 kilogramme bag, according to research institute Cepea.

While well below the R$53.91 reached in June, the highest price on data going back to 2004, that still represents a rise of 34% year on year.

Values have been supported by the disappointing safrinha harvest, which meant that stocks were not fully replenished after a robust export programme in 2015.

Last month, the IGC forecast Brazil's overall sowings of corn, including the safrinha crop, rising by 3% year on year "owing to tight supplies and high local prices and total area."

Higher Yields

Although the safrinha corn acreage will remain the same, Imea expects yields to rise because of improved weather conditions compared to the last growing season.

"The summer rainy season ended in early April last growing season, which was two to three weeks earlier than normal," said Dr Michael Cordonnier, analyst at Soybean & Corn Advisor.

"The result was very poor corn yields which averaged 74.2 sacks per hectare or 68.5 bushels per acre."

With a normal end to the rainy season in April-May 2017, Imea expects corn yields in the state to rise to 23% to 91.5 sacks per hectare, or 84.5 bushels per acre.

Financing issues

Still, farmers in Mato Grosso face a major hurdle in obtaining credit for the next corn crop.

"The yields of both soybeans and corn during the last growing season were very disappointing and many farmers were forced to renegotiate their production loans at the bank and their forward contracts with the grain companies," said Dr Cordonnier.

"This is resulted in limited credit for new production loans and they ran into similar problems obtaining credit for their soybean crop," he said.

The tight credit is not expected to improve for the safrinha corn crop.

"It is too early to know how credit tightness will affect the crop," said Rabobank's Mr Vogel.

"Maybe farmers will save on fertilizers to save costs."

By Agrimoney.com

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