Porto Alegre, March 26, 2024 – Last week’s rainfall quite alleviated the climatic stress that was beginning to impose itself on the 2024 second-crop corn. Excessive heat and little rain had been threatening the profile of the Brazilian second crop. There is still a significant and worrying pocket of drought, probably already with production losses, in the center-south of Mato Grosso do Sul, and a portion of second-crop plantations developed in the second half of March, which will have a long way to go to confirm production. Most of the other second-crop regions are now back to normal, including Mato Grosso, with great productivity potential and projection of a very early harvest. The internal market still seeks to wait for climatic variables to try to provide better price conditions for producers. However, the big conflict is: how to delay the commercialization of the second crop and not depend on exports. Brazil will need to export nearly 40 mln tons in the business year, and this initial phase shows a distant pace for this projection to be confirmed. Also in this case, the climate in the United States becomes preponderant.
The 2024 second crop will close its planting with an almost general improvement in moisture conditions in the second half of March. The rain solved most of the concerns in Paraná, São Paulo, Minas Gerais, Goiás, and Matopiba. In Mato Grosso, the central-north region received excellent rain last week and still has a good forecast until the beginning of April. The center-south and west still depend on good amounts of rain immediately, which should occur in the coming few days.
Owing to this year’s soybean harvest cycle, which offered an ideal planting window for the second crop, Brazil will have second crop harvests starting in May, and in some locations in Bahia and Tocantins at the end of April. These are crops in which soybeans were either reaped too early due to the climate or soybeans were abandoned in favor of second-crop corn or cotton. So, we will have part of the second crop arriving very early, in an unprecedented way, of course, still paying attention to the April climate situation. For now, the first fortnight of April should bring good rain to the Center-North of the country.
The questions still open involve the crops planted in March, which will have at least ninety days of weather ahead. This portion will represent nearly 20% of the area of the 2024 second crop. The other issue involving production involves the Mato Grosso do Sul region, parts of the northwest and north of Paraná, as well as the west of São Paulo. Some occasional rain occurred in these locations during the week and mitigated the impact of the heat and drought. In Mato Grosso do Sul, the situation is not comfortable. Some crops planted in February spent 20 to 28 days with only scattered rain and were hit by the heat wave. We can say that in 20% of the crops in the center-south of the state there will be productivity losses, and if the rain does not return, perhaps total losses. So, if there is any loss of production already confirmed and a point of greater attention, this situation is in the center-south of Mato Grosso do Sul.
In this way, the 2024 second crop has different characteristics compared to normal years, such as:
– A large portion of crops planted between December and February 15, at least 60% of the area in several states;
– A portion planted within the window is still ideal but will have all the climate risk for this type of crop, in April, May and June, at least 20 to 25% of crops
– The final planting phase starts in March and perhaps extends to early April, which will have until winter as a climatic risk point;
– The harvest of the second crop, therefore, will be widely distributed between May and September. As is happening with soybeans, this harvest distribution could bring less pressure to logistics and even offer a symptom of lower regional sales pressure. That symptom that the diluted second crop seems smaller in terms of production may be present;
– Generally, the second crop production already starts with a good portion committed to exports. Shipments jump from June to 5/6/7 mln tons per month and offer liquidity for the initial harvest. In 2024, this flow seems extremely weak and, due to domestic prices being better than export prices, this initial flow appears to be heading toward domestic consumers rather than exports.
This picture will show a different environment compared to 2023, with effects also on prices. Trading companies and traders must crowd domestic consumers during the first harvest movement, from June to September, and then try to gain ground in exports, a period in which Argentina may have already stopped exporting.
Would prices be able to remain above export parity just by supporting domestic demand? Perhaps at first, while big consumers position themselves in terms of stocks, prices will be able to ignore weak exports as a point of internal competition. However, eventually, without strong exports there is no way to maintain high internal stocks and price expansion. Without a doubt, La Nina in the second half of the year will be a speculative point after October, but we do not see room for major bullish movements for corn without a major climate variable in the United States, the Brazilian second crop, or even some new big new fact, such as an oil hike.
Copyright 2024 – Grupo CMA