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Strong Forecast for Brazil Maize, US Drought Raises Feed Costs

7 August 2012, at 7:43am

BRAZIL - Maize farmers are having one of their best moments this year. Brazil’s crop should reach a record 69.4 million tonnes, according to forecasts by the National Food Supply Company (Conab). Of this total, 15 million are expected to be exported.

Apart from that, the United States, main global producers of the commodity, is facing the worst drought in recent years and is not going to pick the forecasted 370 million tonnes, reports the Brazil-Arab News Agency.

According to the Trade Director at the Ministry of Agriculture, Edilson Guimarães, maize shipments to the United States reached one million tonnes this year. Apart from supplying the local market, the North Americans use the grain to produce biofuel. At least 127 million tonnes will be turned to production of fuels.

This has resulted in higher prices of corn. One year ago, the grain was traded at US$6.81 per bushel. Last Thursday (2 August), September contracts celebrated in the Chicago Stock Exchange were closed at US$8. One bushel is equivalent to 27.2 kilograms.

In Brazil, each 60 kilogram bag was traded at R$33.50 (US$ 16.50, all Brazilian real values calculated at current exchange rates) on Thursday. One year ago, it was sold at R$30 (US$ 14.80) and, two years ago, at R$19.43 (US$ 9.60).

The increase in prices may be good for farmers, who have greater profits, but it causes concern for maize buyers. As the grain is used to feed animals, the government of Brazil believes that meat prices should rise in the second half.

“We cannot avoid higher prices for pork and poultry farmers. We must wait to see how the market is going to answer, but it is certain that there will be readjustment. However, production of poultry and pork is very dynamic. The sectors may adjust themselves rapidly too,” said Mr Guimarães.

Mr Guimarães stated that there is no risk of lack of supply of the product on the domestic market and stated that the stock of 12 million tonnes of maize that the country should have at the end of the year will be the largest in history. But he stated that the government has been making an effort to supply small farmers in regions that do not have corn in abundance, such as the north east.

The executive president at the Brazilian Maize Producer Association (Apromilho), Alysson Paolinelli, also stated that the price of chicken and pork should rise. Maize answers to up to 70 per cent of production cost of these animal feeds. However, he says that this is the moment for Brazil to become one of the main players in the global market.

“Businessmen have become professional, investing in crops. Now they need the government’s support. They need credit, insurance, logistic support, storage capacity. Our maize has equal or greater productivity to that of other countries. Apart from that, we have two crops a year (in summer and the small crop in winter),” he said.

Mr Guimarães, from the Ministry of Agriculture, recognised that the greater production “is here to stay”, and that there are logistics problems but that the government of Brazil has been working to aid farmers.