Porto Alegre, March 1, 2021 – The month of March begins and some important points will be consolidated by the international market, not only in the short term, but to start a trajectory for the 2021/22 cycle. With some rain forecast for Argentina in the second week of March, tensions over the situation of the local crop may be mitigated, thereby opening the export season. Besides, the Chinese market resumed its activities in the post-holiday period with lower corn prices, which suggests less pressure on imports, at least in the short term. Finally, USDA begins its survey for the planting intentions to be released on the 31st, a leading indicator for an initial vision of the potential supply cycle and prices for 2021/22.
The rain in February proved to be more suitable for later crops in Brazil, as well as for the Argentine summer crop. Plantations in Argentina confirm their production potential mainly in March because this year the planting took place later. Some rainfall in this last week of February in the corn belt (Córdoba, Santa Fé, and Buenos Aires) is sustaining the production potential. Less rain must be confirmed at the turn of the month and early March, but with a better forecast for the second week of the month. If this picture is confirmed, the tensions over the results of the Argentine crop may be eased, with international prices settling down. The crop in Argentina will occur later this year, and the greatest volumes of corn will be more available for sale in May and June. Current prices are quite high, above USD 250 FOB for March and April. From July onwards, the indications are at USD 228/230 FOB. These prices are equivalent to BRL 87 to 93 CIF port in Brazil + domestic freight, which makes imports too expensive.
The USDA is beginning the US planting intentions survey, which must last until March 18 and be released on the 31st. There are 6 to 7 million acres to be disputed by corn and soybeans. The firmness of corn prices on the CBOT and September prices at USD 4.80 against soybeans at USD 12.20/bushel seem sufficient for this volume of area to be equated between the two cultures, that is, some growth in corn and some growth in soybeans, until September the climate issue will be preponderant, as well as the confirmation of record export volumes of corn and soybeans. A reversal in exports could even generate more stocks by the end of the business year.
The other point is China’s 2021 crop. Besides the strong discussion about how much corn China will still need until the start of its local crop in October, there is the question of the continuation of these growing needs for 2022 or not. The divergence over the size of stocks in China is not likely to be solved anytime soon, and the market will count on the assessment of stocks of 50 million tons (by private sources) to 196 million tons (by USDA). In the midst of this, there is a trend of imports from China with a consensus of 24 million tons, but there are estimates of up to 50 million tons. Until September, price movements in China will be the main indicator of whether it will need more imports or not. It is the only way to consolidate a clear and real sign of supply and demand in the country.
The Chinese government has defined its strategy to try to recover local production, according to the consulting firm JCI. Besides the emergence of transgenic production in the northeast of the country, in areas with more technological resources, the government will encourage micro properties and improve the use of technology in production.
Agência SAFRAS Latam
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