Brazilian market of corn must see harvest advance in July

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     Porto Alegre, June 27, 2022 – The harvest is advancing in Mato Grosso and Goiás at a much faster-than-normal  pace and, in some locations, the sight of corn outside of silos generates a rather negative expectation. We must remember that the Brazilian harvest is still more premature, we warned about the delay in the soybean trading, which impacts the space to absorb a record second corn crop, and that exports, however good they are developing, do not have enough speed to absorb all the short-term supply. Now, corn is coming from Paraguay, Mato Grosso do Sul, Paraná, São Paulo, and Minas Gerais. More supply for the next sixty days and that will need to find domestic or export flow.

     We are only in the third week of June and the anxiety for a strong harvest this month showed that the South region, at least, ended the first semester with stocks at the limit. In this way, it is evident in the Brazilian domestic market that the first semester showed a tight picture of regional supply, however, the private sector storing strategy and the early arrival of the second crop helped to neutralize the effects of supply in the first semester. Of course, the emergence of exports from March onwards was the internal surprise, which can be justified by the fact that producers wanted to retain soybeans and liquidate corn stocks.

     Now, the harvest in Mato Grosso is well advanced for the time of year and, in some places, there are stocks outside of silos. This is due to the fact that there are still a lot of soybeans in warehouses and the very speed at which corn is flowing in the second crop. Productivities are being evaluated between 70 and 130 bags depending on location. In Goiás and Minas Gerais, the harvest has sped up, with yields reaching 40 to 100 bags per hectare.

     With some delay, because of low temperatures since May and rains in the fall, the harvest in the regions of Paraguay, Paraná, Mato Grosso do Sul, and São Paulo must advance from this week. The presence of a lot of soybeans still in warehouses, mainly in São Paulo, is still a negative variable for prices at the beginning of the second crop harvest. However, the Southern region still has good prices and will be able to easily absorb this beginning harvest.

     In general, we continue with the same trajectory for the domestic corn market, exports need to advance. Prices in the interior are still high compared to the port. The week ended with port indications at BRL 92 on average, while in the interior of Paraná offers were at BRL 88/90 FOB and the interior of São Paulo at BRL 85/87. Levels that do not allow for new exports. In contrast, Rio Grande do Sul and Santa Catarina still have high prices due to this slightly delayed harvest and arrival of corn from other states with levels of BRL 95 to 100.

     The exports carried out and the shipment commitments until July reached 7 mln tons over the week. July jumped to 2.7 mln tons, with potential for 3.5 to 4 mln. Thus, from the annual target of 37 mln tons, the country has 30 mln to be carried out between August and January, that is, an average of 5 mln tons a month. The care with this picture is exactly in this environment of exports. We still have 60 days of weather in the United States, which could bring some surprises for prices and an additional surge in exports. However, the possibility of a full US crop, even if it is not a record, could decrease external prices from September and hold back this flow of demand to Brazil. For now, there is good demand for Brazilian corn for the entire second semester, but prices are always the mathematical reality of the CBOT, premiums, and exchange rates.

     Agência SAFRAS Latam

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