SAO PAULO/BRASILIA, Brazil (Reuters) — Brazil expects grain production to reach record levels in the new year because of favour-able weather that would replenish corn stocks and help the country rein in stubbornly high inflation.
The prospect for increased Brazilian production, and a forecast that Argentina’s farmers would plant more corn and produce a crop of 36 million tonnes, up six million from last year, would add to already ample supplies and weigh down prices.
In its first projections for the new grain season, Brazil’s agricultural statistics agency Conab said soybean production could rise to 104 million tonnes from a drought-hit previous crop of 95.4 million. Brazil is the world’s largest soy exporter.
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Conab forecast that the corn crop would reach 82.3 to 83.8 million tonnes, sharply higher than 66.7 million tonnes last season, when local prices skyrocketed, increasing costs for poultry and pork processors.
Some key grain-producing regions in Brazil were affected by a prolonged drought, with the centre-west state of Mato Grosso seeing heavy losses for the second corn crop.
As a result, Brazilian corn consumers had to resort to imports, mostly from Argentina. Brazilian corn prices hit a record high in June, around $23 per bag in the benchmark Mogiana region in Sao Paulo.
They have since slipped back to around $16 but remain above historical levels.
Brazilian Agricultural Policy Secretary Neri Geller said the government works with an outlook for favourable weather, expecting excellent production for the new crop.
“As soon as the first crop enters the market, prices will fall a lot. That would have a significant impact on inflation,” said Geller.
Besides export-oriented grains such as soy and corn, Brazil also expects good production of important staples such as beans and rice, which were also hit by the drought earlier this year, causing discontent among poorer Brazilians.
“We have expectations for strong beans production,” said Geller.
Conab expects the second corn crop, which is planted right after soybeans are harvested, to reach 56.1 million tonnes in the new season, compared to 40.8 million tonnes the previous year.
The total grain crop is expected to be 210.5 to 214.8 million tonnes, compared to 186.3 million tonnes in 2015-16.
Geller also said the country has comfortable stocks of corn, indicating imports of the cereal in the new crop year should be limited.
