Porto Alegre, November 22, 2022 – While the domestic market continues to observe the climatic factor on the summer crop, Brazilian corn exports, in this last quarter of the business year, are starting to surprise. In two weeks, the schedule of corn shipments grew by more than two mln tons, which brings November to the surprising volume of seven mln tons on schedule. Thus, the annual accumulated exports jump to 39.5 mln tons and must easily beat the record of 41 mln tons in 2019. Attention now turns to the volume of shipments in December and January, which can put the number of 2022 far above expectations.
The Brazilian domestic market continues with the presence of regional offers that focus on clearing the warehouses until January, when the soybean harvest begins, needing as much space as possible given the size of the expected production. These offers that emerge, routinely, meet domestic demand and relatively balance supply and prices for domestic consumers. Some of them take advantage of the movement to guarantee stocks until early 2023, betting on the entry of the summer crop as a point of supply. Others choose to wait for the offers that emerge and position themselves only for the short term to meet their demand. Some locations in the country still have a good supply to be withdrawn from warehouses until the soybean harvest arrives, while others already show tranquility about this need for space for the summer crop.
Between the decisions of domestic consumers and the needs of growers for future space, there is the exporter. This year, given the international variables, such as low US stocks, difficulties in Ukraine, and the completion of exports by Argentina, demand is very concentrated on Brazilian corn. This had already been predicted after the European crop failure. However, exporters are really surprised by this international demand for Brazilian corn. Right now, premiums in the Gulf of Mexico for US corn remain quite high, above 140 cents a bushel over the CBOT. This keeps US corn still expensive for world importers compared to Brazilian corn, with premiums of 70/80 cents. So, demand continues to converge toward Brazil.
This movement of Brazilian corn shipments continues to be very aggressive. November now has seven mln tons scheduled for shipment, and 3.3 mln tons of this total have already been shipped. The number surpasses the traditional month of largest Brazilian shipments, which is September, followed by August. In addition, December already has more than 2 mln tons in the shipment schedule and could reach 4/5 mln tons. January is the closing month of the Brazilian business year and, given the pace of shipments, we may have surprising numbers of exports this year.
Now, the accumulated from February to December reaches 39.5 mln tons. If the higher schedules for December and January are confirmed, the year’s shipment number could easily exceed 42 mln tons. The consequence of this scenario is that carryover stocks will be reduced to a more critical level, possibly below 4 mln tons.
The impact of this scenario on the market is that we will see a reduction in the corn supply in the Brazilian domestic market in the coming few weeks. The market seems to still have volume offers in the interior, but we still have more than two months of demand until the summer crop begins, which represents nearly 15/16 mln tons, just to supply the domestic market. A dispute between the domestic market and exporters may be more evident in the coming few weeks for corn for December and January. This situation also shows that the domestic market will be more dependent on the arrival of the new summer crop to supply itself. At this point, harvest pace, weather, and selling interest by growers may affect the price picture.
It will be quite difficult to flow corn over long distances amid a record soybean crop. In this way, the concentration of business will be close to consumption. The Southern region is the first that starts reaping from January. Rio Grande do Sul and Santa Catarina will still have export demand for February and March shipments, but a short window in a summer crop that promises to have a good size for both states. Only Rio Grande do Sul must reap the double production of the last two crops, of course, if the rains continue in December and January. In the other states, the summer crop arrives a little later, which may cause some markets, such as São Paulo, to end up showing price highs as of January or early December. Regional demand for local corn and high freight rates for corn from other states could be a bullish combination in a regional market that is unlikely to position itself with long-term stocks. The cut in carryover stocks, via excess exports, generates a greater dependence on corn to be reaped and, at this point, the chances of highs may emerge.
The summer crop continues in good condition in Brazil. There are signs of water stress in parts of the center-south of Rio Grande do Sul, southwest of Goiás, and northwest of São Paulo. In other locations, the situation is getting normal and with good progress of the summer crop. In the South, corn is already entering the pollination and silking phase, a critical stage for production in which it needs rain in the next 45 days, at least. The Southeast region has a regular picture, now with rains in Minas Gerais. It is not possible, so far, to forecast any more critical situation for summer corn crops.
The 2023 second crop continues to focus on the good planting generated by the ideal window period of the soybean planting. Some locations in the east of Mato Grosso, southwest of Goiás, and the southeast may miss the second crop planting deadlines due to regional situations such as delayed rains or even the replanting of some crops due to hail damage. Situations that are usual in Brazil and do not change the trend of optimal planting for the second crop.
In Argentina, the picture is still not reassuring. The rains returned in November, mainly in the Nucleus region, enabling the advance of corn and soybean planting. Good rains in the province of Buenos Aires for the last ten days have contributed to the advance of corn planting in the main growing province. With La Nina’s presence in the global climate, attention to the rhythm of rainfall in Argentina remains key to both corn and soybean markets.
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