Porto Alegre, August 5th, 2024 – The Brazilian market had a greater slowdown in port prices last week, at least for most of it. However, the leadership remains in the hands of exporters, who, despite some decline in premiums, still maintain relatively high prices at ports. The strong exchange rate and the CBOT trying to recover at the end of the week helped prices once again. The market remains firm for demand through the Santos port, while the North Arch is producing good volumes in the shipping schedule.
The Brazilian harvest was 88% complete last week, well ahead of average, and there should be few areas left to be reaped in the second half of August. Earlier planting and drier weather in May and
June brought this cycle forward, as the situation is being confirmed. Sales were slow in the first two months of the harvest and began to speed up in July. With the harvest starting earlier, the corn flow did not keep up with the inflow of corn from the fields. So, we have plenty of corn in silo bags, outside of warehouses, and, of course, in warehouses in all growing regions. Logistic costs have not helped with the transit of large volumes of corn from Goiás and Mato Grosso to consumer regions in the South and Southeast. Therefore, CIF prices in consumption hubs need to rise to equalize these transportation costs and supply in such locations.
This is one of the reasons why prices end up rising in the South and with some room for the Southeast. Production losses in Mato Grosso do Sul, Paraná, and Minas Gerais along with purchasing difficulties in Paraguay generate this type of regional environment of searching for more distant volumes as long as logistics conditions allow it. We now have 47.5% of the Center-South’s second crop committed to sales already made and 41.7% in the Matopiba region. We are only at the beginning of August, so there are still large volumes to be moved to the domestic market and exports in the coming few months.
In this environment, we can say that in July traders made heavy purchases, late or not, but in volume enough to lengthen the position of ships in the line-up of Brazilian ports. Shipping appointments grew by more than 2 mln tons in a week, bringing August shipments now to a potential of 5 mln tons. July closed with 4.98 mln tons in effective shipments at Brazilian ports, slightly higher than in 2023. August 2023, however, registered the shipment of 9.4 mln tons, the highest monthly shipment in Brazilian history. We do not believe that this flow will be repeated in 2024. The August data, however, draw attention to the speed and volume of the shipment schedule.
We are following the expectation that Brazil will have to meet the target of 40 mln tons this year, with an average of 5.5 mln tons/month to be achieved by January. July and August seem to meet the target, but June still had poor shipments. We now have the challenge of the version: export shipments x domestic market demand. This demand competition will determine the domestic price condition. Paraná, Mato Grosso do Sul, and Minas Gerais do not seem to have a way to collaborate with this export environment this year. Paranaguá, for example, has no ships scheduled for August, as well as São Francisco (SC) and Vitória (ES), ports that traditionally receive plenty of corn for shipment during the second crop. On the other hand, the ports of North Arch and Santos are now making up the numbers for Brazilian exports.
The depreciated real, international prices that may find some stabilization if there is a real decline in the dollar index, and Argentina with a more adjusted scenario are indicators that will make up this internal price formation in Brazil. Starting this month, the market scope includes the scenario of the beginning of planting of the summer crop in the South of the country and the climate scenario. Since La Niña has not yet been defined, neutral weather prevails in the forecasts for the early spring. Planting should start this month in the west of Rio Grande do Sul and Santa Catarina. The sentiment for planting remains unfavorable, with market prices very adjusted to costs in the region, while in Paraná they do not cover production costs. Is there a chance of a larger reduction in area? The areas in these regions are discreet and have limited potential for decline, but it is clear that the prices currently indicated for the 2025 soybean crop are much better than the profile of corn in contracts for January and February in the summer.
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