Brazil’s Mato Grosso storage shortage underpins corn selloff fears
Brazilian farmers have reported a shortage of oilseeds and grains storage capacity in the state of Mato Grosso – the country’s agriculture powerhouse – in a move that raises questions on potential market impacts as new production comes off the fields.
Limited storage options could be particularly significant for the domestic corn supply as Brazil prepares to harvest what is expected to be a massive soybean crop.
“Farmers have been holding back on corn spot sales waiting for higher post-harvest prices but a ‘leftover’ pressure is likely ahead as producers need to sell off stocks to free up space for upcoming soybeans,” HedgePoint Global’s Victor Martins told Agricensus.
“In January, this leftover pressure tends to hit the market,” Martins said.
However, there is no consensus on what the impact of a shortage of storage could spell for the domestic market.
“If the new soybean crop meets its potential, spot corn sales may gather some momentum to free up space for beans, but I do not believe it would come to a large-scale selloff,” Agrural’s Daniele Siqueira said.
“It would be something more concentrated in Mato Grosso, as there is little corn available in other states due to the safrinha crop loss, and even in Mato Grosso the amount of unsold corn is relatively small,” Siqueira added.
The shortage of silos and warehouses in Mato Grosso is structural as the state has capacity to store up to 38 million mt of grains and oilseeds from an estimated 2021/22 production of 77 million mt, according to data from the state’s agriculture institute IMEA.
Amid robust demand, Mato Grosso’s farmers have been complaining about the shortage of storage capacity and high storage costs at third-party facilities.
Moreover, funding to increase and improve storage facilities under the annual federal rural credit programme Plano Safra ran out in just over a month after the release of the 2021/22 programme, with farmers unable to contract further volumes.
However, while Martins believes the lack of storage space may push corn spot sales up ahead, pressuring domestic prices, Siqueira thinks storage issues are “secondary in the short term.”
“If we produce 144 million mt of beans and 118 million mt of corn in the 2021/22 marketing year, storage may become a widespread problem ahead but that is not yet the case,” Siqueira said.