Maize production scales and the impact of commercialization in the futures market on net operating income in Brazil

Abstract

Maize is the second most cultivated grain in Brazil, and the crucial step for maize growers is when they have to define the right strategy to sell their maize. The challenge is finding a selling scenario that optimizes profits and reduces risks, when maize growers need to use the barter option, selling maize in exchange for agricultural inputs. Is have to find an appropriate balance between the quantities allocated to the barter, direct sales or future markets alternatives. The objective of this paper was to analyze the scale of maize production and calculate net operating revenue as a result of percentage variations in maize futures trading. Using data from maize growers in the State of São Paulo and estimates of their farms’ size, different scales and percentages of maize production sold in the futures market were used to establish the consequences on net revenues obtained from these marketing alternatives. The growth in net revenue is noticeable in all scenarios, however in those cases in which most of the production was negotiated in future markets presented an increased net operating revenue, while scenarios characterized by increased allocation of production in exchange for agricultural inputs showed a decreased net operating revenue. The growth of net revenue in all scenarios suggests that good negotiation strategies for maize sales not only prevent farmers from market fluctuations but also increase the maize grower's operating revenue.