Cepea, May 20, 2020 – Agents from the Brazilian corn market are currently focused on the development of the second crop. Irregular rains in southern and southeastern Brazil and in Mato Grosso do Sul State may lower crops productive potential. This scenario kept sellers away from the market in the first fortnight of May, underpinning the upward trend of corn prices in Brazil.
It is worth to mention that, as sowing of the second crop corn took longer to end, crops are in different development stages. Thus, irregular rains tend to damage only part of them.
On May 12, Conab (Brazil’s National Company for Food Supply) released new supply and demand estimates for the current season. According to Conab, the 2019/20 harvest should total 102.33 million tons, a new record. This increase is linked to the adjustments in the outputs from the second and third crops, primarily to the larger area in the second crop, which is estimated at 75.91 million tons, 3.7% higher than the previous.
For the third crop (in northeastern Brazil), the output is forecast to reach 1.17 million tons, 3.9% up. On the other hand, production estimates for the first crop were slightly revised down, to 25.25 million tons, 1.5% lower than that in the previous season.
Domestic consumption is now estimated at 68.53 million tons, 1.9 million tons down compared to that estimated in April, but 4.3% higher than consumption last season. The decrease in consumption estimates compared to that previously reported is linked to the uncertainties related to the effects of the covid-19 pandemic on the chains that purchase corn, such as livestock and power (refineries).
So far, corn exports in the current season (February/20 to January/21) have been kept at 34.5 million tons, which may be revised, due to the strong dollar and the higher attractiveness of the Brazilian product at ports in the last weeks. Trades at ports are still calm, but for the second semester, prices have already reached 51 BRL/bag.
In this scenario, by the end of the season, ending stocks are estimated at 11.14 million tons, 1.8 million tons higher than that forecast in April and 2% up compared to that in the previous year. This points to a more comfortable scenario in terms of domestic corn supply.
USDA – According to estimates from the USDA, Brazil may harvest a record crop in the 2019/20 season, of 101 million tons. As regards the 2020/21 season, the USDA estimates the Brazilian output to total 106 million tons.
Globally, the USDA estimates the 2019/20 output to decrease by 0.8% compared to that from the previous crop (2018/19), totaling 1.114 billion tons. This is linked to the reduction in the corn area in the United States. World consumption has also been influenced by the covid-19 pandemic, which should affect world inventories by the end of the season. Thus, the USDA estimates inventories to be at 314.72 million tons, 1.94% down and the lowest since 2015/16.
In Brazil, deals were hampered in the domestic market in the first fortnight of May, but prices rose in most regions. Sellers were away from trades, attentive to the possible effects of the weather on productivity and to the movement at ports. Purchasers, in turn, were closing sporadic deals, buying corn only for the short-term, waiting for the second crop and for the batches previously purchased.
Thus, between April 30 and May 15, the ESALQ/BM&FBovespa Index for corn (Campinas, SP) rose by 4.6%, closing at 50.57 BRL (8.67 USD) per 60-kilo bag on May 15.