By Roberto Samora
CUIABA, Brazil, May 17 (Reuters) – Producers of winter corn in Brazil must renegotiate delivery contracts for forward sales, curtailing exports of the grain, after dry weather caused severe losses to the crop, specialists said.
Farmers will begin harvesting the winter, or second, corn crop in the coming weeks, and the heaviest losses are expected in the leading two producer states of Mato Grosso and Goias, which together account for half of the national output.
Corn crops in other states, including Minas Gerais and Mato Grosso do Sul, are also expected to suffer losses due to dryness, but Agroconsult analyst Valmir Assarice said defaults are likely to be few.
“People are very uncertain at the moment,” Assarice said, “but … in the end, the producer will fulfill his contract, either delivering the product or renegotiating (delivery).”
He said buyers of winter corn on the market were few and typically large trading companies.
“If the producer defaults, he will be put on a blacklist, and nobody will buy from him next year,” Assarice said during Agroconsult’s Rally da Safra crop tour through the grain belt.
He added, however, that a considerable number of contracts would have to be renegotiated due to the shortage of the commodity.
Luiz Nery Ribas, technical director of soybean producers association Aprosoja, said there were many types of contracts used on the market. Some of the strictest ones require payment of the value of the contract plus fines on failure to deliver.
Others only require fines, while the delivery of corn is more flexible, with producers sometimes allowed to deliver in the following crop.
The Mato Grosso agriculture federation Famato estimates the state’s producers have sold forward 63 percent of the expected crop that should start harvesting in June.
“Accounting for losses, that 63 percent sold could turn into 80 percent of the crop,” said Daniel Latorraca, superintendent of the Imea agricultural economics institute of Mato Grosso.
Analysts are already lowering their expectations for Brazil’s corn exports in the second half of 2016, as international grain merchants are likely to see better returns from selling the corn domestically than from shipping it abroad, Assarice said.
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