Lower supply abroad and in Brazil limit prices drops

Cepea, August 16, 2021 – The downward trend of corn prices, observed in many Brazilian regions surveyed by Cepea in the first fortnight of August, weakened in the last days, reflecting the estimates released in the second week of the month confirming lower supply in Brazil and abroad. In Brazil, data show that the drought and frosts reduced the productivity of second crops. In the United States, the drought in some areas hampered production too.


Thus, deals were sporadic in the national spot market. Purchasers were waiting for some batches to be delivered and/or the harvesting to advance, closing deals in the spot market only when necessary. Sellers were focused on both crops and the productivity decrease, cautiously supplying corn to the market, aiming to take advantage of the current price levels.


Between July 30 and August 13, the ESALQ/BM&FBovespa Index for corn (Campinas, SP) dropped by 1.5%, closing at 99.87 BRL (19.05 USD)/60-kilo bag on August 13. At B3 (São Paulo Stock Exchange), contracts were boosted by estimates for lower supply.


ESTIMATES – Data released by Conab (Brazil’s National Company for Food Supply) in the second week of August indicated another decrease in the Brazilian corn supply in the 2020/21 season. The second crop was revised down to 60.32 million tons, and the first and third crops, to 24.89 million and 1.43 million tons, respectively. Weather issues during crops development, majorly second crops, sharply reduced crops productivity.


Considering the three crops, Conab estimates the Brazilian corn output in the 2020/21 season at 86.6 million tons, confirming a decrease of 15.5% compared to that last season and the lowest harvest since 2017/18, when Brazil produced 80.70 million tons.


With the production decrease, Conab increased imports estimates to 2.3 million tons between Feb/21 and Jan/22, much more than the 1.45 million tons imported in 2019/20.


Conab estimates consumption to reach 70.91 million tons in Brazil, boosted by the demand from the livestock sector. Exports estimates were revised down, from 29.5 million tons forecast in July to 23.5 million tons in August. In this scenario, ending stocks would total 5.14 million tons by Jan/22, half the volume registered in early 2021 and the lowest in the last seasons. This context is raising expectations for firm prices until the beginning of next crop.


So far, Conab has not released estimates about the area for the summer crop of corn in the 2021/22 season. Still, the corn area is not expected to change much. Despite the current price levels in Brazil, the good remuneration and expectations for a high demand for soybean are supposed to limit an exchange of areas between these products.


The USDA released a report on August 12 estimating the Brazilin crop of corn at 87 million tons in the 2020/21 season, 17% down from the previous.


CROPS – The dry weather in the first fortnight of August favored the harvesting in many Brazilian regions. In Paraná, activities had reached, by August 9th, 22% of the state area, according to Seab/Deral. The quality of the corn crops in PR has been lower this year. In Mato Grosso, until August 6th, the harvesting had reached 93.47% of the state area, according to Imea.


In Mato Grosso do Sul, the corn harvesting had reached 20.1% of the state area by August 6th, and in São Paulo, Goiás and Minas Gerais, activities had reached 25%, 61% and 37% of the areas by August 7th.





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