Brazil’s 23/24 corn crop will have its projections adjusted in line with the appropriate climatic events and growers’ decisions. It is in this context that Safras & Mercado updates its numbers without the media influence evident at this moment in the country.
With a crop of 125 mln tons, Brazil will be able to have at least 45 mln tons for exports. A country that has this volume of exportable surplus will not surely have a supply problem even if there is a climate setback with the second crop. Greater competition between the domestic market and exports can be expected. What really changes the domestic market is a strong US crop failure, with repercussions on port prices and the export flow by Brazil. Cutting the Brazilian crop to look for price reactions does not work in the current information environment.
Safras & Mercado updated the Brazilian corn crop with a cut to 125.8 mln tons, against more than 129 mln tons in the December projection. The summer crop in the Center-South is being reduced to 25.6 mln tons, against 26.7 mln in the previous estimate, due to the productivity of this first half of the harvest, in the south of Brazil, lower than expected earlier. The harvest is still discreet in other summer regions for an update. We do not see a worsening of the summer crop from now on, as the productivity of later crops has been within the normal average.
The 2024 crop has, in its favor, an excellent improvement in general rainfall in growing regions. The ahead-of-schedule soybean harvest allowed for an excellent planting window for the corn crop, and we already have corn in Mato Grosso that will begin pollination and silking in March/April. Of course, some regions where late planting or replanting of soybeans has occurred are closing the window for corn, such as, for example, western Mato Grosso do Sul and northern Minas Gerais, besides all of Matopiba. The 2024 second crop area is still open, but we clearly notice a better advance in short-term sales of inputs, particularly seeds, which avoids an area cut above what is expected today.
So, we will have very early crops already being reaped at the beginning of June in Mato Grosso, and we will have crops being reaped in September in several locations across the country. A more distributed harvest between June and September could put less pressure on logistics, of course, if growers do not concentrate too much stranded soybeans in warehouses until then. A good portion of the area in eastern Goiás and northern Minas Gerais will, once again, be converted into sorghum, a fact that should increase the production estimate in 2024.
In Matopiba, surprisingly, the performance of soybean crops has been very good, and if there are weather conditions in March, planting intentions will improve for the corn’s second crop. However, sorghum and millet are expected to replace part of the corn’s second crop area this year.
The crop in Brazil’s Center-South is now estimated at 87 mln tons, compared to 99 mln in the 2023 crop. Today, there is no way to predict a smaller crop. In Matopiba, production falls from 16 to 13 mln tons due to cuts in area and technology. The Brazilian crop must hit 125.8 mln tons, which is still comfortable to meet all domestic demand, without any risk of shortage.
The Brazilian supply and demand picture will be updated this week by Safras & Mercado. The update must show the possibility of exports of 45 mln tons in 2024, given the data on production and domestic demand. This volume is the Brazilian exportable surplus, but it does not mean that we will reach this volume. The big difference between 2023 and 2024 is that there has been no global supply panic so far. The United States has fully replenished stocks. Ukraine is resolving its export logistic flow in the middle of a war. Argentina has fully recovered exports and must be aggressive in sales from March onward.
Argentina’s presence in heavy sales from March, which is expected to go on through October, will affect Brazilian competitiveness in exports. Today, there is no aggressive port demand for Brazilian corn. Brazilian corn currently costs over USD 200 FOB, far from competitors in the United States and Argentina. In 2023, Brazil shipped 5.5 mln tons between February and June. In 2024, we should not exceed 1.5 mln tons.
So, when we look at potential exports for 2024, we notice that Brazil does not have the same export demand appeal as last year. Thus, the production cut for the second crop is actually a good adjustment that the domestic market makes to its potential demand for the year. There are opinions in the domestic market imposing a forecast of 55/60 mln tons in Brazilian exports in 2024. In fact, we believe that we will have difficulty shipping 45 mln tons given external competitive factors and prices. In 2023, prices on the CBOT ranged from USD 5 to 6/bushel, today we are at USD 4.20/bushel. Argentina was out of the market. Ukraine still has shipping problems, and China is positioning itself with Brazilian corn. China will continue to buy Brazilian corn, but other importers will divide purchases among other exporters.
We face two important situations for prices and export demand. The first is the climate in the 2024 second crop (from March to May), which could generate a speculative environment in the domestic market. The second is the climate for the US crop. With area cuts, if there is a serious problem with the US crop, prices could rise again, enabling better port prices in Brazil and changing the internal environment. However, these are the known conditions to affect prices in Brazil. Creating production cuts, in an attempt to stimulate the sale of second-crop inputs based on corn price highs, does not effectively change the market environment.
The domestic market remains slow but with a difficult environment. On the one hand, growers try not to accept the prices and become confused between what they hear from the Brazilian agricultural media, that is, information that hinders rather than supports trading decisions. On the other hand, an internal demand that has no competition with exports. There is still old-crop corn to sell, summer is advancing, and exports cannot find liquidity for volumes. Port ideas today at BRL 56/57 for March/April, with shipment in Rio Grande, had only one buyer at BRL 62. At either price, the level is low, there is no acceleration in demand, and without competition from exports, the domestic market has no bullish strength. For second-crop corn, indications last week were at BRL 55/57 for August/September. So, this does not encourage growers to sell in the interior, and exports do not advance, which is decisive for very slow sales for the 2024 second crop.