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Brazil’s ag minister seeks infrastructure investments

Country looks to move a promising corn crop, but costs could hold them back.

While Brazilian Ag Minister Tereza Cristina was in New York last week, Mato Grosso corn producers’ forward sales reached up to 66% of the promising second crop. Corn prices in the country’s second-largest second-crop corn state of Parana saw prices of up to $2.82 per bushel.

The Minister of Agriculture met with decision makers from the major investment funds to showcase the investment opportunities available in Brazil. Investments in infrastructure and bio-energy, Cristina indicated, are particularly welcome: railway, waterway and highway investments topped her wish list. The minister said her ministry aims to collaborate closely with the Infrastructure Ministry in order to improve crop storage and transportation nationwide—and thus compete better with you.

Challenges for second-crop corn

Sergio Bortolozzo, who leads Abramilho, the most recognized national corn producers’ association in Brazil, said the post-truckers-strike freight rates (see my blog on the strike,) have increased transportation costs. The cost increase has had a drastic effect on corn farmers—and it’s likely to hit hard starting in a few weeks when the second-crop corn comes in. After all, it’s been estimated that as much as 70% of Brazil’s total corn production comes in the second crop, especially in the big soybean states like Parana and Mato Grosso.

In fact, Brazil’s truckers are lighting up the internet with talk of a new strike starting March 30. The truckers claim not all the government’s promises, which brought about the end of last year’s labor action, have been implemented. If Truckers’ Strike II comes to be, it could make things more difficult for producers aiming to move product.

Freight table exacerbates infrastructure costs

Though some producers last year stood side-by-side with truckers in their road blockages in a show of sympathy for a group of people it was in their interest to support at the time, the reality of the new, higher freight rates has set in. “It hits a lot harder because the loads are smaller, transportation (costs) weigh heavily on us,” said Bortolozzo in an interview on Canal Rural.

Meanwhile, those producing swine and poultry feed in Brazil’s chief swine and poultry production area, southern Brazil, end up importing cheap corn (and soymeal) from nearby Paraguay and Argentina, whose truckers freely undercut Brazil’s freight price rates. With those production areas nearby and under the Mercosur trade zone, it can come out cheaper.

The final kick in the pants comes from the state of Mato Grosso, Brazil’s top second-crop corn producer. The state levies a 6% tax on corn exports, thus taking another bite from the cob. Margins are tight, and tighter margins often prompt producers to cut back on inputs in order to squeeze an extra centavo or two out of each bushel.

Brazil’s infrastructure and other issues make it harder to force a much bigger bushel price for Brazil’s second-crop corn. They’re not going to stop producing a big second crop in good weather years, as most farmers appreciate the advantages of managing a crop rotation in a single season, and as long as they can cut back on inputs if they see prices dropping. But their stocks are full and they’ve got what the weatherman promises should be a big crop coming in 2018-19, which makes it ever more important for Cristina to convince those bankers to invest In Brazil’s transportation infrastructure.

 The opinions of the author are not necessarily those of Farm Futures or Farm Progress.

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