Prices oscillate and liquidity is low in Brazil

Cepea, August 20 2019 – Corn prices increased in the Brazilian market in the first week of August, influenced by international price rises at CME Group (Chicago Mercantile Exchange) and the US dollar appreciation against Real, which, in turn, boosted quotes at Brazilian ports. In the second week of the month, however, quotes were pressed down by the international devaluation of corn.


In that scenario, purchasers left the market, aware of the price drops at ports and expecting quotes to decrease more in the coming weeks. These agents were also focused on the delivery of the product previously purchased, which lowered the demand for corn. Estimates pointing to record production and exports in the 2018/19 season also lowered the demand for the cereal.


Sellers, in turn, were not interested in trading large batches and were taking advantage of the firm weather to end the harvesting of the second crop – many of them opted for trading soybean rather than corn. Thus, liquidity was low in Brazil in the first half of the month.


PRICES – Between July 31 and August 15, the ESALQ/BM&FBovespa Index (Campinas, SP) remained stable (+0.3%), closing at 36.22 BRL (9.07 USD) per 60-kilo bag on August 15.


FIELD – In the field, the harvesting of the second crop (2018/19) is ending. Farmers from Paraná and São Paulo are taking advantage of the dry weather to go on with the activities. According to data from Seab/Deral, 85% of the area had been harvested until August 12. In Mato Grosso, 99.81% of the area has been harvested, according to data from Imea released on August 9.


ESTIMATES – Conab has revised up production estimates for the Brazilian 2018/19 corn crop, to 99.31 million tons, a staggering 23% up compared to that in the previous season – which would be a record. Considering corn imports at 500 thousand tons and initial inventories at 15.6 million tons, the domestic corn supply in the 2018/19 season is estimated at 115.41 million tons, a record too.


Higher production in the second crop influenced this result. The good development of soybean crops allowed corn to be sown in the ideal period in Brazil, and the weather favored the cereal development. Thus, productivity may increase 25%, to 5.88 kilos per hectare. Thus, the second crop is estimated at 73.07 million tons, 35.6% up compared to that from 2018. Concerning the first crop, the area sown totaled 4.9 million hectares, and production, 26.23 million tons, 3.5% and 2.1% down compared to the previous season.


Exports estimates were revised up to 34.5 million tons by Conab (National Company for Food Supply), reflecting the appeal of the Brazilian corn. On the average of the year (January to August 8), the first contract traded at the Chicago Mercantile Exchange (CBOT/CME) was 3.2% lower than the ESALQ/BM&Bovespa Index. In the same period last year, the Index was 24% higher than the first contract at CBOT, which confirms the current competitiveness of the Brazilian corn in the international market.




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