Export parity underpins prices at record levels in 2020

Cepea, January 4, 2021 – In 2020, the Brazilian corn market was marked by record production and prices. The sharp dollar appreciation, the valuation of corn abroad and the firm demand from the international market underpinned the export parity and, consequently, corn prices in Brazil, majorly in the second semester, when they set real records. On the other hand, the world corn production was lower.


The year began with concerns about supply in the first quarter. The fast exports pace and high consumption in Brazil in 2019 reduced domestic ending stocks. Bad weather conditions limited the productive potential of the first crop. Thus, lower inventories added to the low production in the first crop boosted prices in January and February.


Between March and June, perspectives for a record output in the second crop and the increase of the covid-19 in Brazil pressed down domestic corn prices. With the social distancing measures to fight coronavirus, agents feared that the demand from exporters and Brazilian consumers could decrease, which happened, indeed, in April. However, this scenario was soon offset by fast exports and the resume of purchases in the domestic market in the following months.


Thus, in the first semester, the ESALQ/BM&FBovespa (Campinas, SP) dropped by a slight 0.2%. The average in that period, of 51.88 BRL per 60-kilo bag, was 36% higher than that in the same period of 2019, in nominal terms.


For the second crop, the weather favored crops development, and the harvest totaled 75.05 million tons, 2.5% up from that in the previous season and a record. For the third crop, production totaled 1.77 million tons, a staggering 46% up from the 2018/19 season.


Overall, the Brazilian corn output was a record, with the three crops totaling 102.5 million tons. Considering total production, initial inventories (10.2 million tons) and imports (950 thousand tons), the total availability of corn in the 2019/20 season is estimated at 113.65 million tons. Domestic consumption is forecast at 68.66 million tons, leading to a surplus of 45 million tons, according to data from Conab (Brazil’s National Company for Food Supply).


Despite the record production in the second semester, the sharp dollar appreciation, price rises abroad, and firm international demand underpinned the export parity and, consequently, domestic prices from July, which set records in October.


On October 28, the ESALQ/BM&FBovespa Index for corn hit 82.67 BRL per 60-kilo bag, the highest real level in the series of this product, which began in 2004. However, in December, the dollar depreciation against Real pressed down quotes at Brazilian ports and, consequently, in the interior of Brazil.


On the average of the second semester of 2020 (up to December 22), the ESALQ/BM&FBovespa for corn averaged 64.92 BRL/bag, 25% up from that in the first semester and almost 60% higher than that between July and December 2019. The dollar averaged 5.39 BRL in the second half of 2020, 33% up from that in the same period of 2019.


If the estimates from Conab are confirmed, Brazil may export 34.5 million tons of corn in the 2019/20 season (Feb/2020 to Jan/2021). Between February 2020 and November 2020, shipments totaled 28.5 million tons. Ending stocks in the 2019/20 season (in late January 2021) may total 10.5 million tons 23% down from the average in the past three seasons. Thus, the 2019/20 season should end with lower corn availability than that in the past crops.





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