High demand should underpin prices in Brazil this year

Cepea, January 15, 2021 – Low inventories, high demand and uncertainties about supply in the 2020/21 season should underpin corn prices in the Brazilian market in 2021, when quotes should be higher than the average in previous years.

 

The first crops were damaged by the dry weather, majorly in southern Brazil. For the second crop, the slower and late soybean sowing (compared to previous years) has brought uncertainties about both corn sowing and possible effects on productivity. Thus, the 2020/21 season should begin with uncertainties about supply – so far, official estimates point to record outputs in Brazil and in the world.

 

Demand should continue high in both the domestic and the international markets. In Brazil, consumption is growing, due to higher interests from the livestock sector. Exports should continue favored by the strong dollar and international price rises. Early deals, primarily for exports, tend to limit supply in the spot market in the coming months, which may increase the competition for the product.

 

Conab (Brazil’s National Company for Food Supply) estimates the first 2020/21 crop corn at 24.18 million tons, 5.8% down from the previous, due to the 2.1% area reduction and expectations for lower productivity (3.8%). For the second crop, so far, Conab has kept stable area estimates, but forecasts an increase of 2.3% in the average productivity of Brazilian crops. If Conab’s estimates are confirmed, corn production should total 102.59 million tons.

 

Domestic availability next season (initial inventories + imports + production) may surpass 114.2 million tons, 0.4% down from that last season. On the other hand, domestic consumption should grow high, and thus, the gap between the domestic availability and consumption would be of 42.4 million tons, 6% down from that last season. This volume will be available for exports. So far, Conab estimates 35 million tons to be shipped between Feb/21 and Jan/22.

 

The USDA estimates the world corn production to total 1.143 billion tons, 2.4% higher than the previous, reflecting increases of 6.5% in the United States and 7.8% in Brazil. Consumption should total 1.158 billion tons, 2.2% up.

 

As regards international corn trades, the USDA forecasts an increase of 5.5%, to 184.6 million tons. For 2020/21, the USDA estimates China to import 16.5 million tons of corn, 117% up from that last season, which may favor Brazilian corn exports in the coming months. So far, Brazil is expected to continue as the number two corn-exporting country in the world, with 40 million tons.

 

(Cepea-Brazil)

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