Brazilian market of corn is emptied by record exports

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     Porto Alegre, December 13, 2022 – The preparation of consumers for this turn of the year does not allow the market to reflect the very high Brazilian exports of 2022. Furthermore, the need for space for the soybean crop in January keeps the market with some regional offers that collaborate to hide the impact of the emptying of great offers in the internal market. The arrival of the summer crop, despite some concern in the Missões region, in Rio Grande do Sul, makes consumers focused on the regional harvest from January and with less interest in old-crop corn. Unchanged demand and record exports are a combination that could impact prices in the coming few weeks in the Brazilian market.

     Brazilian exports accumulated from February to December reached 43 mln tons. In a surprising December, with almost 7 mln tons nominated for shipment, exports confirm the new record and could definitively empty carryover stocks. January still has open shipping positions, but if the pace of December is sustained, we can estimate shipments of 2 to 3 mln tons, at least. It is clear that a volume like this will have an impact on the carryover stock environment and demand more from the arrival of the new crop.

     If the consumer sector is, once again, allowing for this strong export flow and working with short-term stocks, the concentration of purchases in the first regional harvests will be intense. One should not imagine that, in mid-December, there are still large volumes to be withdrawn from warehouses in the short term to put pressure on the domestic corn market. Fundamentals will need to prevail at some point in the market, as they have so far at the harvest of a record second crop of corn.

     In 2022, consumers adopted a posture of remaining slow in purchases and working with short stock positions, not accepting very high prices, and limiting increases in import cost levels. Imports from Argentina are currently limited due to the local export registration already at the limit. From Paraguay, maybe some batches are still possible. This means that the domestic market will have to be supplied with local and regional supply over the first semester. The issue is that there will still be exports through the port of Rio Grande in February and March, possibly being the price guide for the period. This competition between exporters and the entire domestic market boosts prices for the first half.

     At the same time, there is the decision of growers selling or not the summer corn. The issue of space will be important in the first semester and may define this marketing strategy, especially if soybean prices plummet, as it may happen, leading producers to retain soybeans and not corn. Trading progressed well in November, given the concern to empty warehouses, reaching 80% of the 2022 second crop. On the one hand, it met great export demand, on the other, it helped some consumers to position themselves in terms of longer stocks. This also reveals that selling pressure has passed, there is still internal demand for December and January, as well as the export commitments. We cannot consider the entry of the summer crop as a bearish indicator, since the consumer sector’s need to replenish stocks could cause a rush to the plantations at harvest.

     The climate has been regular for corn in the regions that plant the summer crop. The biggest concern, again, is part of Rio Grande do Sul, concentrated on the west side, Missões, where some loss of potential productivity might occur. In other regions, the situation is normal, with the harvest appearing in Paraná and Santa Catarina in February, in São Paulo firstly in January and then in April and May, and then in Minas Gerais and Goiás. The consumer sector will need to manage the first semester well to make domestic supply feasible and at still healthy prices.

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