With very tight corn supplies and record high domestic corn prices, the Brazilian Minister of Agriculture announced last week some financial incentives for farmers to increase their corn and grain sorghum production. Large livestock producers in southern Brazil are already importing corn from neighboring Argentina and Paraguay in order to keep their facilities operational and they have been petitioning the government to take a more active role in increasing grain production.

The government cannot order farmers to increase their corn and sorghum production, but they can provide financial incentives for the production and marketing of grain. The Brazilian government’s main support for agriculture is in the form of subsidized low interest production and marketing loans.

Starting July 1st with the start of the 2021/22 Harvest Plan, production loan limits for large producers to grow corn and grain sorghum will increase from R$ 3 million to R$ 4 million. For medium size producers, the loan limit will increase from R$ 1.5 million to R$ 1.75 million.

Complicating the corn supply situation even more is recent dry weather negatively impacting the safrinha corn production in south-central Brazil. The safrinha corn crop accounts for about three quarters of Brazil’s total corn production and this year’s crop was planted the latest in history in many locations due to the delayed soybean harvest. The late planted corn is now being impacted by an early end to the summer rainy season, which is increasing the fear that the corn will run out of moisture before maturity.

The early planted safrinha corn in Brazil is now pollinating or beyond and the later planted safrinha corn is in vegetative development. In the more southern production locations, the latest planted corn may also be impacted by freezing temperatures before it matures. Generally, the safrinha corn is harvested between June and August.

Domestic corn prices in Brazil are approximately double those of a year ago. Strong international demand for corn and a depreciation of the Brazilian currency have let to tight stocks becoming even tighter. On the B3 Exchange in Sao Paulo, corn prices have been in the range of R$ 100 per sack for several weeks (approximately $8.25 per bushel).