Index decreases more than 12 percent in Real

Brazilian corn prices moved down in the first month of this year, pressured by the stable demand and by the higher supply. From Dec 28th to Jan 31st, the ESALQ/BM&F Index (Campinas region) decreased 13.22 percent in Real, closing at 28.41 reals or 16.15 dollars per bag of 60 kilos, returning to the levels of the end of October 2007.

Data show that this pressure on prices should continue until the end of this year. On Thursday, Jan 31st, corn futures averaged between 22.50 and 23.50 reals per bag of 60 kilos from May to September this year at the Sao Paulo Mercantile Exchange (BM&F). Only from the contract November/08 on, prices should return closer to 26.00 reals per bag.

Even with the recent decreases, domestic prices are at higher levels compared to the last year. The cost of production for the winter corn crop, however, has been concerning growers. In the Mato Grosso state, for instance, the fertilizer cost averaged 1,040.00 reals per ton in January, raising more than 26 percent over the 2006/07 crop. In aggregated, the corn cost of production has been 7 percent superior, in average, to the previous season.

Another uncertain aspect for 2008 is related to exports. In 2007, it was exported 10.9 million tons, which represented roughly 21 percent of the Brazilian production. It resulted in a restricted domestic supply, considering a national consumption of 40.5 million tons and one production of 51.3 million tons. For this year, the National Company for Food Supply (Conab) forecasts the exported volume at 9.5 million tons, with a domestic consumption totaling 44 million tons and the production, 53.4 million tons - one more year of limited supply. In this context, the winter corn crop should keep determining the volume to be directed to the international and domestic markets.


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