Porto Alegre, December 19, 2023 – If the summer crop will now depend on the harvest results for a better assessment, the 2024 crop is fully open. At this moment, it is no longer a question of seed or market prices, but of the weather getting normal in January to make it possible to plant the second crop. Fears about the climate could further reduce the intention to plant corn if there are no more favorable weather conditions. It is at these points that SAFRAS & Mercado cut the production projection for this 23/24 crop, be it for the summer or second crops. The cuts, without a doubt, do not compromise any internal supply for next year, however, they put Brazil back on the path of direct competition with the export sector. A smaller crop and high exports, as in 2023, would result in internal supply adjustments. The domestic consumer sector will need to be more proactive in 2024 to inhibit this high export flow and more complicated supply.
The 23/24 climate cycle signaled El Nino. Statistically, El Nino never brought a completely unfavorable picture for South America regarding soybean and corn crops. The exception was the super El Nino of 2016, which brought some production losses to Mato Grosso, due to drought, and Argentina, due to flooding. However, in this 2023 environment, we are experiencing symptoms of a super El Nino without statistically confirming it. NOAA placed temperatures in the Pacific at 1.8ºC above average, far from the confirmation that everyone wants or that has been signaled. The terrible rainfall regime in Mato Grosso, the Amazon, and now growing worse in Goiás and northern Minas Gerais, surpasses any normal cycle, which should basically affect the Matopiba region. The difference this year is the scope of the climate effects harmful to production.
The update of estimates for this 23/24 crop by SAFRAS & Mercado, carried out last week, brings two very different situations. The first refers to the summer crop, with the effect of excessive rain; the second, to the 2024 second crop schedule, which will basically depend on January rain.
Regarding the summer crop, we have the following points:
– Crops in southern Brazil suffered from excessive rainfall in October and November;
– The evaluation, for now more visual than through effective results, suggests that Rio Grande do Sul and Santa Catarina may experience losses due to pollination amid excess moisture and low luminosity;
– However, we have chosen to project the new yield from January when harvests will begin in the Missões region. The central region of Rio Grande do Sul suffered most from this excess moisture and may have worse-than-normal results.
– South and Southwest of Paraná, at first, have closer-to-normal conditions;
– In São Paulo and south-central Minas Gerais, there is no major problem. However, planting was delayed, and the crop is later in these regions, with harvests in February/March;
– The discreet summer crop of Goiás, in corn, is planted further in the mid-east. This region has a delicate rainfall regime this year, with clear possibilities of production problems this summer;
– In Matopiba, Bahia’s summer corn crop is basically unable to be cultivated due to the lack of rain. The state will still be able to plant in January, however, the rain needs to arrive.
Thus, downward adjustments in acreage and more conservative yields hold the summer production in the Center-South at 26.4 mln tons, compared to 26.9 mln tons previously. There is a market vision that production in Rio Grande do Sul will be much smaller. Just like in dry seasons, when the market tends to exaggerate, in this excess of rain in 2023 we prefer to wait for harvests and effective results. Bahia, in turn, may see a greater cut in its planted area given the climate situation.
The 2024 second crop has the following indicators:
– In Paraguay, soybean harvests will begin in January, with a perfect window for corn. However, growers will choose to plant more soybeans than corn in their second crop. Therefore, the planted area in Paraguay is expected to decrease by 10 to 15% from 2023;
– Paraná and Mato Grosso do Sul only need regular weather in the first quarter of 2024 for planting definitions. Soybeans have a harvest window that makes the second-crop planting feasible until March;
– São Paulo, for now, has a normal outlook for the second crop, but many growers have decided to reduce the second-crop area due to corn prices and costs. This profile can still change until March, the final planting window;
– Minas Gerais has two divergent situations. The central to southern region of the state, which now also plants a second crop, is within the window for planting that lasts until March. On the north side, from Paracatu to Unaí, the climate situation is very close to that of Bahia. Soybeans are delaying the planting too much, and if the rains continue scarce, at the beginning of 2024, there will be convergence toward sorghum or another alternative culture to second-crop corn;
– Goiás has coped with problematic climate situations even in Rio Verde. Planting and replanting soybeans and concerns about very irregular rain could lower the second crop area, despite seed prices having dropped. Planting can be carried out until March in the second crop, however, we will need a rainy first quarter to ensure safe development. The soybean cycle is being brought forward due to the heat and more discreet rainfall. This improves the window for corn, but it is only positive if it is associated with an improvement in the rainfall regime.
– In Mato Grosso, the situation is most critical for the 2024 crop. Soybeans are starting their cycle sooner, and it would be more common to see stronger harvests in January, besides the progress already seen in December. This first harvest cycle continues for cotton. However, not everyone plants cotton, rice, or sesame, very fashionable this year. So, if planting conditions are good in January, second-crop corn will start earlier. The primary issue is the weather in January and February. With rain back to normal, corn planting will advance, with a reduction in area, indeed, but it will advance. However, if the climate profile remains the same, there may be more second withdrawals from corn planting due to the lack of moisture that would guarantee the initial progress of corn crops. The planting window runs until February. Therefore, greater attention should be paid to the state;
– In Matopiba, there are strong fears among local growers about planting a large area of second-crop corn in this El Nino climate regime. Even if the phenomenon starts to lose strength from April onward, the planting decision takes place beforehand. Soybeans have advanced their planting in Tocantins and parts of Maranhão and Piauí and still provide a viable window for the 2024 second crop. However, rainfall is very irregular, and much of the area bound for corn in the second crop could be switched to sorghum, besides areas that will not have second crop this year.
In general, therefore, we are reducing the potential second crop area to 14.8 mln hectares, compared to 15.5 mln in 2023. In Matopiba, from 2.62 to 2.35 mln hectares. The potential second-crop corn production now falls from 94.4 to 89.1 mln tons for 2024, a reduction of almost 10 mln tons compared to 2023. Of course, assessments of planting and weather in the first half of the year will still dominate the 2024 numbers.
With smaller summer and second crops, the Brazilian corn output is reduced to 129.1 mln tons, in this new update, compared to 140 mln tons in 2023. Well, lower production next year is not reflected in the national supply chaos, but important details must still be considered. The first is that we will depend a little more on corn from Paraguay, and perhaps Brazil’s Northeast needs to import some corn from Argentina in the first half of the year to meet its local demand.
Besides, the export target for 2024 drops to 47.6 mln tons, against an initial forecast of 50 mln tons and 55/57 mln in 2023. On the one hand, Argentina’s return to exports tends to remove much of the external demand from the Brazilian second crop. We must remember that Brazil set sales records in 2023 due to strong purchases from China and the absence of exports by Argentina. Then, even with a lower acreage in the United States in 2024, the yield profile could neutralize the upward momentum on the Chicago Board of Trade. A new good US crop tends to generate more demand for this origin to the detriment of Brazil.
So, what would be the characteristics of Brazil’s corn in 2024? The domestic market will have to be more proactive about the supply of the second crop, that is, it will not be a year in which we can wait for the harvest, and the excess supply will cause major losses for corn. The domestic market will need to compete more sharply with exporters, putting corn prices at or above the levels bidded by trading companies. This is because if Brazil’s selling pace is repeated in 2024 in exports, there is no doubt that the picture will be of higher average prices than in 2023.
These year-end highs reflect these exports in excess in 2023. The line-up now shows 7.4 mln tons scheduled for December, 1.6 mln for January, and cumulative sales for the business year of 53 mln tons. A more adjusted closure of shipments in January could help with the carryover stocks for 2024, otherwise we will enter the new business year with stocks in the grower’s hands that will help us reach the 2024 corn second crop but will keep us tight in terms of prices.
Therefore, the first semester can be full of speculative movements given the conditions of the second crop, be it in terms of planting or climate. Moreover, the profile of the US 2024 crop and export demand for the 2024 crop will define the Brazilian price picture over the year.
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