Lower inventories should underpin prices in 2020

Cepea, January 15, 2020 – The 2019/20 season should start with low corn supply, while consumption is growing in the Brazilian market. The new summer crop may be similar to that from 2019, and the domestic availability should not change much in the first semester. Thus, prices may be underpinned in the short-term, which tends to encourage sowing of the second crop and, consequently, increase supply in the second semester. The world production, consumption and inventories are expected to decrease, reinforcing prices may be underpinned.


The sharp price rises in the domestic market in the last quarter of 2019 encouraged growers to increase the area to be sown with the first crop corn. Data from Cepea indicate that the exchange ratio between products and inputs decreased in the main regions surveyed by Cepea.


Conab estimates the first crop (2019/20) to total 26.3 million tons, 2.6% up compared to that in the previous season, due to 1.2% area increase and expectations for higher productivity (1.4%). So far, the weather has been favorable to crops in the main regions.


Consumption is forecast at 68.13 million tons in Brazil, 6.6% higher than that last season and 12.8% higher than the average in the last three crops. This scenario is linked to higher demand from the livestock sector and new refineries that produce ethanol from corn in central-western Brazil.


By adding the summer crop production to ending stocks – estimated by Conab at 13 million tons by the end of January/20 – corn supply would total 39.4 million tons in the first semester of 2020. This volume accounts for 58% of the domestic consumption in a year’s time. Last season, the first crop production added to initial inventories accounted for 65% of the domestic consumption, meaning that, in the current season, a higher percentage of the second crop should be consumed in Brazil.


For the second crop, so far, Conab estimates the area to continue the same as that in the previous season and the average productivity at 5.5 tons per hectare. Thus, corn production in the second 2019/20 crop is predicted to reach 70.9 million tons, 3.1% down compared to the previous. If Conab’s estimates are confirmed, the output should total 98.4 million tons – private estimates point to a volume near 100 million tons.


In Mato Grosso, soybean sowing was higher than the average in the last five years, according to Imea – despite the problems faced early in season. Still, the ideal period for sowing the second crop corn concerns part of the agents. So far, Imea indicates that the area sown in the state should grow 2.36%, but productivity may decrease 4.25%, which would result in an output of 31 million tons in 2020, 2% lower than that from 2018/19.


For the coming season, Brazilian corn supply (initial inventories + imports + production) may surpass 112 million tons, 3.9% down compared to that in the previous season, but still 4.6% higher than the average in the last three years. This is favorable to sellers, since the domestic surplus (the gap between the domestic supply and consumption) would total 44.3 million tons, 16% lower than that in the previous season. This volume will be available for exports. So far, Conab estimates 34 million tons to be shipped from Brazil between February/20 and January/21.





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