Porto Alegre, August 29, 2023 – The Brazilian market was expecting a crop of corn failure in the United States. Producers retained and continue to retain corn in warehouses, waiting for something that could cause an upward movement in internal prices. The exchange rate tries to help. However, without sharp highs on the CBOT and, consequently, in ports, it becomes very difficult for the internal market to detach itself from external prices, generating an internal environment independent of the external one. But the biggest concern is the loss of the export window due to an exaggerated retention by producers and, at the end of the year, the need to empty warehouses, generating an environment of internal sales pressure.
The domestic corn market was tense last week. With the completion of the harvest in Mato Grosso and Goiás, many producers have the second crop allocated and are waiting for something better in terms of prices. In Paraná, Paraguay, São Paulo, Minas Gerais, and Mato Grosso do Sul, the harvests are advancing, producers still sell little and try to focus on better prices. The agribusiness media once again tries to stimulate producers by suggesting higher prices focusing on a supposed strong crop failure in the United States, as well as on the theory that, with the end of the harvest, prices will go up. For producers, following this kind of bias has already brought many problems for soybeans in 2022, but there are still those who distort the real information in an attempt to convince producers of an environment that is not evident.
Thus, we have slow trading. Producers sell little, Paraguay holds corn, and the issue of selling the second crop is left for later. The expiration of debts on September 30 may bring a more aggressive sales movement, despite producers having sold better soybeans and sorghum in August. The issue to be clearly evaluated is that there is little or no room for highs on the CBOT without a big “new fact.” With the crop tour and the USDA report on the 12th, expectations with the huge losses of the US crop are deflated, and the chance of highs in ports without highs on the CBOT is very low. Without a high in ports, there is no room for internal highs because, with the second crop still crowding warehouses, the internal market does not have room to detach itself from port prices.
In this environment, we still have people trying to focus on the ethanol environment, which could sustain prices. Ethanol demand is already defined for the year in its potentiality. It is not this factor that will change the market. Obviously, as we have repeated in our analyses, exports will continue to be the major determinant of prices.
Exports advance with an excellent profile. So far, Brazil has 27.5 mln tons committed to exports. August has 6.9 mln tons shipped and is expected to surpass the 2022 record by 7.55 mln tons this month. September already has 6.3 mln tons scheduled. For the 50 mln tons projected for the year, Brazil will need to have a monthly average of 6.5 mln tons between October and January. The only question for this average is the competition with the US crop from September versus the retention by Brazilian producers. A combination that could reduce Brazilian sales by losing the export window.
Another fundamental point is that the rains start to arrive earlier, and consequently so does the planting. In western Rio Grande do Sul and far western Santa Catarina, between 70 and 50% of the summer corn crop are already planted. Possibly, at the end of December and January, we will have 2024 corn being reaped, and the buying need in states such as Paraná and Mato Grosso do Sul will be significantly reduced, as well as in Paraguay. This will limit any upward movement until January, and this ends up influencing the Southeast, as the selling pressure continues in São Paulo and Minas Gerais.
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