June 18, 2008

Rising corn prices seen to limit soy expansion in south Brazil

Corn is becoming just as attractive as soy to farmers in the Brazilian state of Parana, said Anderson Galvao Gomes, an agribusiness consultant at Celeres.

Corn will be a barrier to soy expansion in Parana, he said adding that corn now offers better returns than soy.

Last year, thanks to competition from corn and sugarcane, Parana soy expansion was less than 1 percent, according to government estimates from the Agriculture Ministry.

The market is currently favouring both soy and corn and Parana does not have the farm land available to expand both, he said.

Corn is Brazil's No. 2 crop behind soy, of which Brazil is the world's second-largest producer behind the US.

Corn is positive in the western central region, however, but soy is still better. In regions like Mato Gross, soy remains king as there is high demand for soy from soy crushing facilities there, Gomes said.

Brazil harvested a record-breaking 60 million tonnes of soy in the 2007-08 crop year. With soy prices at US$15 a bushel, soy is still attractive despite a weak US dollar and soaring fertilizer costs.

However, as the weakening dollar is already cutting into profits and if costs climb higher, Brazil's soy crop might not expand much in 2008-09, especially when there are more profitable crops like corn around.