Porto Alegre, February 7, 2022 – The Brazilian corn market has shown sharp hikes since the end of December. Even with the harvest in the South region, prices were close to 100, a level considered favorable to growers, despite the production losses of the region. There is some selling pressure in the Southeast, mainly with the characteristic that dominates this early business year, which is the consumer sector’s attempt to find all possible alternatives to contain the rise in corn prices. This involves making regular purchases, avoiding lengthening stocks, and taking aggressive actions in futures prices on the B3 to control expectations. The strong rise in soybeans is a variable that can also define greater corn sales by growers and even facilitate regional supply in the very short term.
With production losses in the South region, corn prices skyrocketed at the end of December and surpassed by BRL 10 to 15 a bag the levels that could mean normal levels for the beginning of the 2022 business year. In the South region, prices ranged from BRL 95 to 102 depending on location and absorbing the local crop that is reaching the market. This is lower than expected, of course, but still with corn enough to meet the short-term regional demand. In the Southeast, there is no decline in production, but crops are later, concentrated in the post-soybean harvest and April and May, as well as in Goiás. Therefore, this supply space occurs in line with the harvest pace and the growers’ sales intention.
In regions where the harvest is going on, there is regional demand, and prices are either supported or suffering some pressure. In this month of February, the soybean harvest is delayed due to rains in several regions, which still allows growers to trade corn from warehouses to free up space and/or get liquidity. A new situation that may emerge is related to the aggressive hike of soybeans. Many growers are reaping soybeans, meeting the contracts depending on the harvest pace, but they do not put new lots for sale because they believe in strong new hikes due to production losses in South America. At some point, this movement could determine a rising interest in selling corn and holding soybeans. We believe this possibility is more linked to the second corn crop from July onwards and less to available corn.
In any case, the numbers for the South of Brazil were worse in the information provided by official state agencies. With summer crops below 3 mln tons in each state, the supply of Paraná, Rio Grande do Sul and Santa Catarina will not total 9 mln tons in the this first semester. Therefore, the growers’ sales decisions can become only occasional situations that must be taken advantage of by consumers in the region.
The other supply alternatives are Goiás and Minas Gerais with the summer harvest, which will take place after April and can lengthen the cycle with the current rains. Until then, the competition for available corn continues. São Paulo, for example, seems to ignore the supply variables and works to contain prices as much as possible, from acting with unfeasible prices in the physicals and influencing distortion of market indicators, as well as aggressive actions on the B3 to lower futures prices and contain bullish expectations. We believe that fundamentals will prevail.
The 2022 second crop, in turn, is advancing at an excellent pace, despite the still somewhat limited rainfall in Paraná, Paraguay, and Mato Grosso do Sul and excessive rainfall in other regions. Planting is very good for the first week of February, with 18.2% of the planted area complete. This indicates that the first crops will be reaped in late June and early July, depending on weather conditions. Paraguay showed strong progress in planting, which already exceeds 50% of the expected area in several locations and has an excellent window. Of course, we will have weather conditions to be observed later on, however, the 2022 second crop is starting with great potential production.
Agência SAFRAS Latam
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