Early harvested corn hitting Brazil's grain markets is lowering record high prices, which have hurt the country's massive poultry and pork industries, specialists said on Monday. Despite the small size of the lots coming early from the fields of Mato Grosso and Parana, Brazil's biggest producer states of the grain, their arrival has driven down the stratospheric prices seen over the past months in the near absence of the main animal feeds ingredient on the spot market.
A few weeks ago, corn was quoted, though hardly sold, at 50 reais ($14.33) a 60-kg bag in Mato Grosso. Prices have already dropped to between 32 reais and 40 reais. "The price is becoming real again ... The liquidity has come back ... These absurd values of the past months were only possible because of the lack of liquidity," said Daniel Latorraca, the superintendent of Mato Grosso's Farm Economics Institute.
He added that supplies of early arrivals of corn would not increase much in the next week, as harvest was still sporadic and nascent. But harvest is expected to pick up by the end of June. Farmers most likely sped up some early harvesting of fields that were ready to capture some of the record high prices on the physical market. Even at between 32 reais and 40 reais, corn prices are still two to three times what they were last year at this time, and the country's meat industry is downsizing to limit losses stemming from high feed costs.
By the end of last week, farmers had harvested 3 percent of Mato Grosso's corn crop. "It's very little corn yet, but it gives an indication, and people realize there is physical corn again and turn off the speculative element," said Ricardo Santin, vice president of Brazil's Animal Protein Association.
He said some producers in Sao Paulo were buying corn at 30 reais a bag in Mato Grosso and bringing it back to the state for a total cost of 40 reais per bag when freight costs were added, which is still better than the 50 reais per bag last week. Santin said the corn harvest in Parana, Brazil's No 2 producer state of the grain, would also pick up by the end of June. He also said that the corn crop from Paraguay would be coming online in the next weeks.
"The peak of speculation is over. Time will only work against the guy that was holding corn," Santin said. The Brazilian farming prices research center Cepea said that sellers of corn were appearing on the spot market in greater number to capture attractive prices in the past week.
By the end of June 2015, only 10 percent of the country's winter corn crop had been harvested. Edmar Gervasio, a corn specialist at Parana state's agriculture secretariat, said the harvest will pick up speed at the end of June in the state, but he dismissed expectations that prices would fully recover to normal levels soon. Prices for corn began to reach record levels in April when drought started to hurt Mato Grosso's winter corn crop, which would have not been so bad had it not been for record exports of the grain over the previous year because of the sharp drop in the local currency. "I don't see a lot of space (to a return to normal prices) because we are talking about Brazil as a whole, which has suffered a loss in production of corn (due to drought)," Gervasio said.