Concerns about the weather keep prices on the rise in Brazil

Cepea, May 16, 2018 – Brazilian agents are focused on the development of the second crop corn. Many of them are concerned with a possible decrease in productivity, due to dry weather. Thus, growers/sellers have postponed sales of new batches. The purchasers who need corn for the short-term, in turn, need to increase bidding prices. In this scenario, corn prices continued on the rise in the Brazilian market in the first fortnight of May.


Between April 30 and May 15, the ESALQ/BM&FBovespa corn Index (Campinas, SP) increased 7.2%, closing at 42.25 BRL (11.54 USD) per 60-kilo bag on May 15.


In the field, the weather continues dry in important corn-producing regions from southern and central-western Brazil, concerning growers, since low moisture may hamper productivity.


However, official estimates have not indicated losses linked to weather conditions yet (compared to April forecasts). On May 10, Conab (National Company for Food Supply) released their eighth survey for the 2017/18 season, revising down the second crop output to 62.95 million tons, 6.6% smaller than the previous crop.


Regarding summer corn, the current season is now estimated at 26.26 million tons, 660 thousand tons larger than that forecast in the previous report, but 13.8% smaller than last crop. Thus, Conab now estimates the total 2017/18 Brazilian output at 89.20 million tons, the second largest crop in all times.


If these estimates are confirmed, corn supply (initial inventories + production + importations, which are forecast at 500 thousand tons) should total 107.4 million tons, the highest in all times. Domestic consumption is estimated at 59 million tons, accounting for only 55% of total supply.


As for fieldwork, Deral/Seab indicates that the first crop harvesting has reached 96% in Paraná State. Regarding the second crop, conditions have worsened. According to Seab, 43% of the crops are in good conditions, 44%, in average conditions, and 13%, in bad conditions.


In Rio Grande do Sul, harvesting has reached 96% of the total area as well. With low soil moisture between March and May, productivity in that state should be lower than in the summer crop.


Globally, the USDA estimates production to total 1.04 billion tons, 4% down compared to the previous season, due to lower supply from the United States, at 371 million tons, and Brazil, at 87 million tons. In Argentina, the output should total 33 million tons. Exportations are forecast at 157.58 million tons, 5% above last crop, mainly due to higher shipments from Argentina, Brazil, Ukraine and Russia.


Regarding global ending stocks, the USDA estimates it at 194.8 million tons, against 227.5 million tons in the 2016/17 crop. The 2018/19 season may total 159.1 million tons. Lower ending stocks are linked to higher consumption. In the 2017/18 season, global consumption may be 3% higher than in the previous season, at 1.06 billion tons, while in the 2018/19 crop, consumption may reach 1.08 million tons.




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