Porto Alegre, November 30, 2021 – While the international market does not set a new trajectory despite maintaining high prices, the Brazilian domestic market has resumed exports. Domestic consumers opened space for exporters to take advantage of good supply liquidity and boost exports. Now, some locations, such as São Paulo and Paraná, are beginning to reduce physical supply, by reducing their selling needs. The climate situation in Rio Grande do Sul worries the central region of the state, but the January harvest is guaranteed in the west.
The domestic corn market now seems to enter a new stage for prices. Owing to the factors already mentioned here, corn had significant declines in October and November, when seasonally growers have a retention period. Until last week, producers were still struggling to receive inputs already purchased and make purchases for the 2022 second crop, such as fertilizers and chemicals. In most cases, to guarantee some delivery, the disbursement was greater than any forecast, which led to the need to sell more corn to cash in. This environment seems to have been mitigated. It is still present in the Matopiba region and in places such as Minas Gerais, that is, selling pressure on corn to buy inputs.
In other regions, however, this symptom seems to be decreasing. A good part of the responsibility for this reduction in sales pressure lies in the resumption of export business. Despite Brazil having lost much of the best sales window abroad, the fact that Argentina closed export registrations for the old crop has reactivated sales by Brazil. Thus, November shipments have already reached 2.2 million tons and with a schedule of 3 million tons. December, a month that previously had the projection of few shipments, has suddenly reached 1.6 million tons so far.
In the cumulative result for the business year, Brazilian exports reached 17.1 million tons. As we still have December and January to boost volumes, it is not ruled out the possibility that the accumulated result for the year is above 18 million tons. Consequently, this will adjust carryover stocks for 2022.
In this environment, the 2022 crop is progressing well. Regional issues with the climate in southern Brazil were already expected due to the arrival of the La Nina phenomenon. Rio Grande do Sul has a situation that is not generalized, but concentrated in the central region of the state, between Passo Fundo and Ijuí. The critical phase to define production in this region has passed. Corn managed to pollinate with 20/30 mm of rain that occurred over the month and with the soil water reserve from October, which was very good in terms of rainfall. Corn ears are formed but will depend on the rains this December for pod filling. Of course, with below-normal rainfall in November, some production losses must occur in these locations. However, any estimate now is a pure exercise of uncertainty.
In other regions, such as the west and northeast of the state, the borders with Santa Catarina, crops are in normal conditions and resisting out of the good water reserve left in October. Therefore, there is some attention factor for December, the rains need to continue, even in these regions in good conditions to enable better pod filling. The harvest on the west side is expected to start in mid-January, and in some places already by the end of December.
In other regions of the country, there is always the attention factor to the continuation of rains, such as in the south and southwest of Paraná and São Paulo, where crops are delayed and should only reach the market in March/April. But, in general, the picture is normal to good, keeping attention to the December and January weather.
From the market perspective, this vision of a still comfortable summer crop keeps domestic corn consumers betting on the arrival of good reaped volumes in the first quarter of the year. Seasonally, the framework does not have this uniform profile. The harvest schedule must be as follows:
– In January/February, harvest in the west of SC and RS;
– In January/February, harvest only from pivots in SP;
– In February/March, light regional harvest of corn and strong concentration on soybean logistics;
– In March/April, summer harvest in all regions of the Center-South except for the west of SC and RS;
– In April/May, harvest in MG and GO.
Therefore, each region will have a seasonal harvest profile and, even if some occasional crops enter the harvest phase in February and March, the arrival of a record soybean crop will dominate the transport and receipt logistics in warehouses. Corn will be left for later harvest. This movement is important for the first-quarter prices. As exports are drying up short-term surpluses at the moment, regional stock positions will eventually be reduced at the turn of the year.
This movement of exporters absorbing the largest volume of offers this year, the domestic market charging prices below ports, and consumers seeking to signal the market a calm supply will give way to an opposite movement when soybeans begin to be reaped in January. If consumers expect to have new regional corn in January and February, they may have a strong surprise when prices rise again at the beginning of the year. The old crop stocks that would allow such supply from January to March ended up being exported in these shipments from November to January, and there is demand for February via the Rio Grande port.
Naturally, the market is still at the mercy of this international price movement in the first quarter and the climate in Argentina. The planting of the 21/22 crop in Argentina reached 51% last week and will depend on rain in December to close work and until March to end the crop. Therefore, there is still a long way to go until the definition of the Argentine crop.
In the case of the Brazilian second crop, the soybean harvest in Paraguay, western Paraná, southern Mato Grosso do Sul, and several locations in Mato Grosso should start in January, with a good portion in February. The first harvest will give way to cotton planting in Mato Grosso, followed by the corn’s second crop. The second crop issue is really related to the supply of inputs, as growers are having serious difficulties in receiving orders and purchasing new ones for planting. The use of less technology seems not to be only a matter of costs but also of availability of some inputs.
Agência SAFRAS Latam
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