Porto Alegre, October 4, 2022 – While we have complex external situations both in the commodities environment and in the economic policy profile, the Brazilian corn market focuses on the flow of exports. The period with some potential sales pressure from producers has passed, and now we will have the turn of the year as a fundamental point for this resumption of more aggressive sales or not. For this, we pay attention to variables such as the exchange rate, the weather in the summer crop, and the flow of export shipments. It should be borne in mind that Brazilian exports continue to be the factor that could reduce carryover stocks for 2023 or even generate domestic surpluses that interfere in the formation of prices at the turn of the year. We remind you that with the soybean crop advancing, it will need strong logistic space in the first half of the year, and corn will need to give up this space at the crop arrival.
With the USDA data for quarterly stocks last week, international prices gained room for support in the middle of the US harvest. Without slack to abruptly decline from the harvest seasonality, external prices remain firm, and low US stocks keep importers attentive to the offers available for the first half of 2023. The players that may be in the market are Ukraine, Argentina after April, and the United States with its low stocks. This may be enough for a readjustment of prices in the global environment, again looking for the maximum levels close to USD 8.00/bushel on the CBOT.
Brazil will have limited corn shipments between February and June, especially if soybeans confirm a record output. Availability will be concentrated in the ports of Rio Grande do Sul and Imbituba (SC). Some ports have high potential shipments between February and March, perhaps 300,000 to 500,000 tons. Therefore, the international market cannot rely on availability from Brazil in the first half of the year. So, the demand for Brazilian corn is now centralized between November and January, a period in which trading companies still have their logistics focused on corn and can meet the still present international demand.
This way, the Brazilian market resumed the charge of good prices for November to January between BRL 92 and 96 at ports and with selling interest. It is clear that exports will not be able to empty all the offers present in warehouses, however, for the large volumes that focus on the release of the warehouses at the turn of the year, export liquidity has been important. Domestic demand, meanwhile, tries to work in the short term, taking advantage of a space of liquidity in which exporters are not present, such as October/November. The point is that this export demand, or at least the viability of corn exports, begins to disappear from mid-January to make way for soybeans.
This week, export shipments are approaching 28 mln tons cumulatively, with September being expected to close near 6.7 mln tons. Note that October does not have the same rhythm as the last three months, even though 3.8 mln tons are a good number for the month. The market continues with a curve for around 37 to 38.5 mln tons in the business year. To surpass this number, October to January will need to register monthly volumes above 4 mln tons.
The crucial final point is the advance of the South American summer crop. Another week of great rains in the South, Southeast and part of the Midwest regions of the country, allowing for advances in the planting of both summer corn and soybeans, very important to define the 2023 second crop planting window. last week’s occurrences were very good in Mato Grosso do Sul, midwestern Mato Grosso, São Paulo, and southern Minas Gerais. The volume of rain is not normal in the center-north of Goiás, Minas Gerais, and Matopiba. However, these are places where the planting has a seasonal advance in October.
In Argentina, the rain forecast for last week was disappointing and had low coverage and scope. Therefore, the situation of water stress in large producing locations remains. Argentina has a later planting window and, for now, this may not affect the crop in its production concept. For the next 15 days, however, the forecast is not good. Some rain in the north, but still with low occurrences in the Nucleo region, such as Cordoba, Santa Fe, and Buenos Aires.
The South American climate factor enters as a fundamental point for markets going forward. With low US stocks and the need for a perfect South American crop, any environment of greater concern will quickly be priced in by the corn and soybean markets.
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