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April 26, 2021

Brazilian Livestock Producers Looking for Alternatives to Corn

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

As domestic prices of corn in Brazil hit record highs, large livestock operations in southern Brazil are looking for alternatives to corn. Two of the largest companies, JBS and BRF, who supply animal feed for their contract producers, have already purchased corn from Argentina and Paraguay in order to keep their operations up and running.

These same two companies are also in the process of purchasing wheat, triticale (a hybrid of wheat and rye), and barley as a substitute for some of the high priced corn. Wheat is commonly used in other countries as a substitute for corn in animal feed when corn prices become prohibitive.

The companies are also asking farmers in southern Brazil to increase their wheat acreage in 2021 as an insurance against a shortage of corn. Data from the Agriculture and Livestock Federation of Rio Grande do Sul (Farsul) indicate that farmers in southern Brazil may increase their acreage of small grains, which includes wheat, triticale, barley, and oats, from 1.0 million hectares to 1.4 million hectares in 2021. The states of Parana and Rio Grande do Sul are the two largest small grain producers in Brazil and farmers in those states will plant their wheat in May and June and harvest it in October and November.

Using wheat for animal rations could cause other problems in Brazil because the country is not self-sufficient in wheat production. Brazil generally only producers about half of their domestic wheat needs with the majority of the remainder imported from neighboring Argentina. Domestic wheat prices in Brazil are already elevated and if wheat is used for animal feed, prices could rise even more increasing the cost of bread and other items in the supermarket. Food inflation is an ongoing concern in Brazil and the use of wheat for animal feed could make the situation even worse.

The Brazilian government just recently suspended the import tariffs for grain imported from non-Mercosul countries such as the United States and Ukraine in the event that livestock producers will need to import even more corn to sustain their operations.

Domestic corn prices in Brazil continue to be supported by the fear that the safrinha corn production may end up being disappointing due to continued dryness in south-central Brazil, which is responsible for about half of Brazil's safrinha corn production. The safrinha corn accounts for about three quarters of Brazil's total corn production.