Prices should be even stronger

The general outlook is positive to Brazilian corn market in 2008. However, players consider also some negative possibilities. On the one hand, a good summer crop and an increase of the winter corn crop area should limit increases. On the other hand, the adverse weather conditions should favor the expectancy of lower supply, keeping values moving up. Even with the undefined scenario, Brazilian corn prices should keep operating closer to the export parity in 2008.

According to the National Company for Food Supply (Conab), the 2007/08 summer crop planted area should enlarge 2 percent over the previous season. The productivity should get stable and, as a result, the Brazilian production should increase only 2 percent.

Regarding the winter corn crop (from February to August), the Conab forecasts a stable area, productivity and production. It should represent 29 percent of the total corn production in Brazil, estimated, up until now, in 52.3 million tons. Exports should remain at a good level, totaling almost 11 million tons in the 2007 - record.

Corn contracts at the Sao Paulo Mercantile Exchange (BM&F) show prices at around 31.00 reals per bag of 60 kilos in Jan/08, 25.00 reals per bag in Mar/08 and 23.00 reals per bag from May/08 on.

At the Chicago Mercantile Exchange (CBOT), the perspective is values closer to 180.00 dollars per ton during all 2008, one of the highest in history. The lower global inventories for the second crop have been driving corn market for a new equilibrium level of supply and demand.

On Jan 11th, the USDA reduced its forecast about the global corn production compared to December, at 766.7 million tons. This volume, however, is still much superior to the 703.9 million from the previous crop. Regarding the consumption, the USDA enlarged its estimation in 0.8 percent over the previous month. In this context, the global stocks should be even lower.

During the first fortnight of January, Brazilian corn prices moved down slightly, due to the lower buyers' pressure and the beginning of harvest activities in some regions - it is expected a good crop production. From Dec 28th and Jan 15th, the ESALQ/BM&F Index (Campinas region) dropped 2.4 percent in Real, closing at 31.94 reals or 18.25 dollars per bag of 60 kilos. Even with the decrease, the current levels are almost 30 percent higher over the same period 2007, in nominal terms.

In the Southern region of Brazil, the harvest should start in the next days - in some irrigated areas, activities have been occurring since the second fortnight of December.


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