Brazilian farmers are committing corn from the 2019 crop before the 2018 harvest concludes, locking in sharp price rises as a drought reduced output in Argentina as well as in fields of Brazil. "I've sold more of my 2019 corn than this year's product," said farmer Jeferson Milanez Bif.
So far he has committed the bulk of the next crop in advance, an unprecedented level of forward sales, he told Reuters during a crop tour that kicked off this week in Mato Grosso, Brazil's largest grain state. Corn futures at the Chicago Board of Trade have risen over 12 percent since the start of the year and are at an almost two-year high at $3.95-1/4 per bushel.
Eder Bueno, another farmer from northern Mato Grosso, said he is adopting a similar strategy as Bif. Brazil's second corn, which is planted after soyabeans, accounts for roughly 70 percent of the country's entire production and make it the world's third largest producer after the United States and China. Agroconsult estimates a 12 percent drop in Brazil's second corn output this year, to 60.2 million tonnes, a projection that it plans to revise down even further, said Andr? Debastiani, a partner at the consultancy.
Although futures sales are picking up, farmers are sitting on this year's crop in hope prices will rise further. As a result, domestic food processors and livestock operations are struggling to find sellers and reasonable prices this season. Privately owned Cooperativa Aurora Alimentos has complained for weeks of "speculative retention" of corn in southern Brazil.
More currency swings and any potential problems with corn produced in the United States may drive price even higher, Debastiani said, adding he expects Brazil's corn acreage to increase next year. Corn prices have risen 26 percent in local currency terms this year, according data from the University of Sao Paulo's Esalq College of Agriculture.
"Chicken farmers call me in desperation from the south (of Brazil) trying to buy corn," said Mato Grosso farmer Joso Eduardo Soares, who pledged 20,000 bags from his 2019 corn to Cargill Inc in return for fertilizer. In March, Reuters learned JBS SA, the world's largest meat processor, was importing corn as internal prices skyrocketed.
Tarso Veloso, an analyst with consultancy AgResource, said the dry weather in the south of Brazil is likely to damage more corn this year than in 2016, referring to the worst drought in recent memory. Agroconsult estimates the corn deficit in the domestic market during the first half of 2018 at around 4 million tonnes.
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