Porto Alegre, August 2, 2022 – During the harvest and with strong logistical difficulties, Brazil’s 2022 second corn crop showed improved prices last week. The central point was, solely and exclusively, the strong hikes on the CBOT, which had an impact on prices in Brazilian ports. If the real had not surged last week, prices could have obtained some further improvement. The movement has facilitated the advancement of export business, now more concentrated between September and November. For the domestic consumer market, the big obstacle to this second crop has been the record-breaking freight costs that make the CIF cost of corn still high, while the FOB price to producers reacts little.
The second-season harvest is advancing. Warehouses are crowding, cooperatives slowing down the harvest progress due to space in warehouses, and some start to use silo bags more clearly as an alternative to keep corn protected and without exerting greater pressure on internal sales. What we see, then, is a process of strong retention on the part of producers, because they have contract commitments to be fulfilled later on, or their financial commitments will be concentrated on August 30 and September 30, or because the condition of transportation does not allow a good flow of business.
While the harvest moves on, the fleet is still very concentrated on properties with short-distance freights and or with producers fulfilling second-crop contracts. With the end of the harvest farther ahead, it is expected that this fleet will return to longer-distance freight and make the flow of business easier for consumers in the domestic market. Meanwhile, domestic and export contracts are being fulfilled, and perhaps this is also a point of support for freight, besides, of course, Petrobras’ resistance to lowering diesel prices.
Last week, prices rose uniformly in Brazil due to high ports. The market was moving toward BRL 83/85 at ports but during the week it jumped to BRL 88/90 for shipments from August to October. In Mato Grosso, business began to move toward October and November shipments at levels of BRL 70/73 depending on location. Therefore, between the harvest flow, the fulfillment of internal demands, and the price volatility at ports, exports are building their structure for this 2022 season.
Now, the volume accumulated in the Brazilian line-up is at 15.6 mln tons between February and August. July has already shipped 5 mln tons and will possibly reach nearly the 6 mln tons scheduled for the month, which is an excellent number for this early season. August already has 5.2 mln tons scheduled and may exceed 6 mln tons in the period. September is generally the month with the highest shipments in the country, and it is possible that we also see high numbers for the month. Thus, between February and September we can accumulate a volume close to 24/25 mln tons. October to January could easily complete around 12 mln tons to the target of 37 mln for the year. The question at this point is whether there will be potential for something greater than this goal. For Brazilian corn exports to exceed 37 mln tons this business year, the flow of sales needs to accelerate from October to January, which seems to start happening.
The big concern for early 2023 is logistics. With 151 mln tons scheduled for the 2023 soybean crop, every space in warehouses and logistics will be dominated by this commodity. Initially, we may have pressures to take away corn from warehouses in December and January, in view of the soybean crop that arrives in January. Then, we may have difficulties in transporting corn over long distances in the first half of the year because soybean production will be reaching the market. Brazil has never witnessed a crop of this size and, regardless of the weather factor ahead, the attitude of concern about future logistics is fundamental. For corn producers and consumers, the 2023 strategy depends on the composition of logistics.
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