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Future of Brazil's corn production is bright

02/17/2014 @ 12:11pm

Odacir Klein, a two-time Agriculture Secretary of the Brazilian state of Rio Grande do Sul and former Agriculture minister of the country, is one of the most recognized leaders of corn growers in Brazil. He is the former president of the Brazilian Association of Corn Producers and coordinates the National Corn Summit, which is held annually at ExpoDireto, a farm show from Não Me Toque, Rio Grande do Sul, in March.

In an interview with Agriculture.com, Klein has denied that there are big difficulties for Brazilian agriculture. In his opinion, Brazilian corn growers only need to have the same income guarantees that American farmers have. Also, Klein believes that the South American giant has great perspectives to increase production of corn-based ethanol and biodiesel over the years. According to him, these new energies are not to compete with sales of grains for human and animal consumption. Klein's forecast is that the Brazilian corn crop this season will fall in a base of 5 to 7 million tons with rising costs adding to the issue of the grain value. According to the Mato Grosso Institute of Agriculture Economics, January's cost to grow corn in that state is US$ 626.94 per hectare.

Agriculture.com -  How much growth does corn production still have in Brazil?

Odacir Klein - I cannot give you a specific number, but the Brazilian production can still grow a lot. We still have a lot of areas to grow and we have the degraded pasture areas that can be recovered. We have a constant increase of productivity. The technology applied is higher, and so goes the productivity. Right now, the corn production is just diminishing because of prices, which were a lot lower in 2013 compared to 2012. This year, production is likely to fall from 5 to 7 million tons. The second corn crop output might be falling also because of rising costs.

Agriculture.com - In the following years, which region of Brazil will see more growth of corn area? North, South or Center-west?

Klein - In terms of expressive volumes, indeed the center-west. The reason is that the center-west as a whole plants the second corn crop. In the South and Southeast, most of the regions don't plant two crops, there is just a decision of the farmer between growing soybean or corn depending on the market scenario, while the center-west has the option to plant both crops. One complements the other (crop).

Agriculture.com - Which are the main difficulties or challenges to grow corn in Brazil? Is it soil conditioning, pest control, chemical application requirements, seed selection, prices, precision ag practices, water, other?

Klein - I don't see major difficulties. We have a very good soil. The real main difficulty is not having a good guarantee of income. We have to follow the example of the USA. We thought that there would be great losses of income because of the recent drought there, but producers haven't had because they have good sources of restitution. Here we need a sort of insurance, similar to the U.S., to avoid those big losses of income as results of droughts and other problems. A better government insurance program should be developed.

Agriculture.com - Eventually, will most of the Brazilian corn be used for feed, ethanol, or human domestic consumption? And what is the current breakdown of those uses?

Klein - Brazil is not a great user of corn for direct human consumption. Mexico is one of the countries that uses corn for that. However, corn here is frequently used as a base of other foods such as beef, swine meat, and eggs. The Brazilian corn production this year will be roughly 65 million tons. Most of it (roughly 80%) is used for animal protein; 65% of it is for domestic consumption, and another part is exported.

Agriculture.com - Ethanol made in Brazil is basically made from sugarcane. Is there great potential for the growth of corn-based ethanol in Brazil?

Klein - Yes, there are projects of corn growers from Mato Grosso do Sul and Mato Grosso to produce ethanol in the future. The idea is to sell corn when there are surpluses of corn, so they can sell it and aggregate value. Ethanol would get cheaper in that region and would go north. The feed industry protests and does not want it.

Agriculture.com - Now, you could talk as the current president of the Brazilian Union of Biodiesel. That energy is mostly produced in Rio Grande do Sul, and 71% of it comes from soybeans. Can you confirm the production numbers from last year and what the potential is for biodiesel in Brazil in your opinion? Can producers aggregate value?

Klein - The production in 2013 was 3 billion liters. And there is a big potential. Nearly 18% comes from the oil, and the remaining part comes from the soybean meal. You can use the meal for biodiesel or you export with aggregated value. It is not conflicting with production of soybeans for human consumption.

Agriculture.com - But why is there news of financial trouble in the sector? Is there still more production than sales in the year? Are the factories bankrupting?

Klein - There are not leftovers. All that we have produced last year was sold in the auction, which is the resort that we have to sell biodiesel. But the current problem with legislation is idle capacity in the factory generated with these auctions and the current mixture of 5% of biodiesel at the diesel. We are working to change the law to put more biodiesel in that mixture. Of the 77 factories, 27 factories have idle capacity. The profit margins are low compared to the capacity. We think that will be changed if the legislation is changed. Some factories currently prefer to stop rather than compete in the auctions.