Porto Alegre, November 28, 2023 – Without a doubt, Brazilian corn shipments have been surprising in 2023. The result of a record Brazilian crop, excellent Chinese demand, and Argentina’s absence in sales in the second half of the year have contributed to this exceptional result registered so far. For now, export commitments now exceed 50 mln tons, not including all December registrations and additional shipments in January. Therefore, it is natural that the Brazilian domestic market feels some support for price recovery, given the regional reduction in offers. What was not expected at the end of the year is the carefree positioning of the consumer sector in observing this export flow, keeping stocks low and susceptible to this situation of regional reduction and retention by producers.
The Brazilian summer corn crop, 23/24, continues to advance in good conditions. In the extreme South, excess moisture and low luminosity have brought some potential reduction in productivity. However, for now, what we have is a delay in the cycle, plants a little shorter than normal but without signs that pollination was poorly carried out to the point of causing exaggerated losses. The extension of the cycle should slightly delay the start of the regional harvest in Rio Grande do Sul until the second half of January. Rising temperatures and more sunny days should help crops in the coming few weeks.
In Paraná, São Paulo, and Minas Gerais, rains have been regular in the last few days, enabling the completion of planting and good development of the crops already planted. However, of course, we are talking about harvests from February onward, mainly in São Paulo. In Goiás, rains have improved in recent days, and planting has advanced on the eastern and northern sides of the state. It will certainly be a much later summer crop in the state, requiring a longer supply in local consumers’ warehouses. The north of Minas Gerais is still experiencing climate difficulties, almost following the weather conditions in Bahia, which is not going well either. The Northeast region has had strong increases in corn prices this November. As we pointed out, the Northeast carried out large exports and, now, with the end of the harvest in Sergipe, the local consumer sector seems to have noticed the reduction in local offers.
The consumer market’s lack of observation of export flow information, or observation with delayed information, has led to this kind of lack of concern over the formation of stocks. Brazilian consumers seem to believe that exports can grow without affecting the regional supply. If we look at Mato Grosso, for example, prices still cannot exceed BRL 40, on average, as there is still a good volume of corn to be sold in the state. However, this supply from Mato Grosso is very dedicated to exports and is unable to supply other states due to the difference in costs. As prices in other states are low, the flow from Mato Grosso to other destinations is not viable.
Now, some states are beginning to show this condition of drying up local supplies due to the excess exports carried out so far. The Northeast region is the first to show this adjustment in availability, also because Piauí, Maranhão, and Tocantins had record exports this year. The South region has a supply gap until the arrival of Rio Grande do Sul’s crop, and there is also Paraguay, which has not put pressure on sales in the region. The Southeast had good exports, it still has plenty of corn in the producer’s possession, however, we have arrived at a time when producers are in no rush to sell, consumers need to replenish stocks, and prices end up rising.
In the search for supply, there was a rush last week for lots in Mato Grosso do Sul and Goiás, with prices at around BRL 50 or even more. São Paulo managed to replenish stocks in the short term, however, it made large sales to the port, and maybe selling pressure is not that strong from now on. Minas Gerais has good stocks of sorghum and corn in the hands of producers, but buyers’ demand has boosted prices.
In fact, some Brazilian consumers seem to continue to be reactive to corn prices rather than proactive. The year’s big highlight has been the high flow of monthly exports in record volumes, generating a natural regional reduction in offers. It seems that part of consumers still think about July, at the harvest of the second crop, forgetting that the high volume of exports removes excess domestic supply. And the situation has very little to do with the environment of the 2024 second crop, where everyone is aware that planting will take place anyway.
Now, exports already exceed 50 mln tons in the business year, with shipment appointments in December and some in January. The year’s number could be between 55 and 57 mln tons if there are no surprises with January’s data. The concentration of stocks this year is in Mato Grosso, Goiás, Mato Grosso do Sul, and Minas Gerais in the hands of producers. There are some stocks in Paraná, however, the state has a strong internal consumption in the first half of the year to be met. Very little in the extreme South and Northeast.
Some selling pressure is still possible at the turn of the year, especially in January. However, the market is trying to create a bullish environment for 2024, perhaps seeking to motivate producers to plant corn in the 2024 crop based on the observation of higher future corn prices. The market raised the entire corn price curve from the first half of 2024 until the second crop on B3. Levels of BRL 70 in September for a port indication for the same period at BRL 63/64. There is no price movement toward these levels with the 2024 crop. If the second crop prices remain at these levels above the port, Brazil will lose strength in exports, and we will have corn leftovers in the second half of 2024.
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