June 19, 2008

 

Corn crop in Brazil and Paraguay shrink on frosts

Winter corn crops in Brazil and Paraguay will be smaller than expected due to crop-destroying frosts, Brazilian agronomists said Wednesday (June 18, 2008).

 

"Paraguay was hit by a cold snap that for sure wiped out 40 percent of its crop," said Steve Cachia, a senior commodities analyst at grain brokerage Cerealpar in south Brazil. Paraguay was expecting to harvest around 2.5 million tonnes of corn. Cachia was traveling in Paraguay on Wednesday.

 

In Brazil, the No. 1 corn producing state of Parana has been hit with an early winter frost in the southwestern part of the state. Crop damage is estimated to run between 500,000 and 1 million tonnes. Parana state borders Paraguay on the east.

 

Andre Pessoa, director of crop consultancy Agroconsult said it is still too early to determine if frosts would have inflicted that much damage to the crop, adding that losses may not be huge.

 

Nevertheless, a drop of roughly 1.5 million tonnes in the combined Paraguay and Parana winter corn crops is equivalent to more than half of what Brazil has exported in the first five months of the year, according to Cerealpar.

 

Brazil exported 2.4 million tonnes of corn as of May 31, with another two million already committed for export in the months ahead.

 

Parana, a south Brazilian state, was expecting to harvest 6.2 million tonnes of corn this winter out of a total, national winter corn crop of 17.9 million, according to Agroconsult's estimate.

 

Brazil plants corn twice a year. The winter crop is around a third the size of the summer crop, which was close to 40 million tonnes.

 

Taking into account production in the nation as a whole and the winter crop's size relative to the summer crop, Parana's frost should not pose a major supply problem, Cachia said.

 

However, any decline in supply in Brazil puts pressure on corn prices and ultimately impacts food inflation, which is already at high levels.