Drought damages big portion of corn in Brazil's Mato Grosso

SINOP, Brazil (Reuters) - Brazil’s largest grain producing state of Mato Grosso is expected to harvest up to 15 percent less of so-called second corn because of a drought, the president of a group representing farmers in the region told Reuters on Monday.

FILE PHOTO: Men work next to a truck unloading second corn (winter corn) near Sorriso in the Mato Grosso state, Brazil, July 26, 2017. REUTERS/Nacho Doce

Mato Grosso farmers will collect an estimated 25 million tonnes of second corn this year, according to Antonio Galvan, the state head of Aprosoja grain growers association forecast.

The drought is hitting the south of the state particularly hard. In the mid-north of Mato Grosso, where Galvan’s family sowed about 1,300 hectares of corn this season, farmers may lose an average 10 percent due to lack of rains, he said. Harvesting in his fields will start in about 40 days.

Mato Grosso produced almost 29 million tonnes of corn last season when the weather was nearly-perfect, according to government data. The state accounts for about 30 percent of Brazil’s total corn output in a given year.

Brazil’s second corn, which is planted after soybeans as a rotation crop, already accounts for roughly 70 percent of the country’s entire corn production and made Brazil a strong competitor to the United States in global corn markets.

This year, delayed soy planting and harvesting pushed back the sowing of second corn in some farms, especially in the south of Mato Grosso and in states like Paraná, making those regions more exposed to the perils of dryness.

“The ending of rains earlier this year made the problem worse on those properties,” Galvan said.

The situation spells trouble for farmers who chose to sell their corn in advance amid a spike in internal prices driven by the drought in many parts of Brazil, Argentina and Paraguay.

“Crop failure may lead to breach of contract,” Galvan said. “If farmers don’t deliver the corn, they are liable to pay buyers the difference between the price in the contract and market prices.”

Forward sales of Brazil’s second corn through May 4 amounted to 32 percent of expected production, above the 29 percent from the same period last year and below a 40 percent five-year average, according to data from Datagro, a consultancy.

“I normally don’t sell any corn in advance because of the risk associated with rain patterns,” Galvan said.

Reporting by Ana Mano; editing by Grant McCool