Porto Alegre, May 23th, 2024 – While we still depend on an international framework to modify the price environment, the domestic market is trying to gain some speculative strength, in this pre-harvest of the 2024 season, in the face of this extremely dry May. Second-crop regions between the north of Paraguay and the interior of São Paulo received practically no rain in May, and many are in critical production phase. The losses will occur in addition to those already projected, in particular, in Mato Grosso do Sul. Mato Grosso is starting the harvest with excellent productivity, and Goiás should continue with the start of work this week, also with high yields. Exports show some movement, however, that is still insignificant to modify the internal market and avoid any adjustment in prices toward export parity. Of course, due to the profile of the second crop, some changes in the trading framework will occur in the second half of the year.
The domestic corn market begins to try some reaction in regional prices in the middle of the pre-harvest of the 2024 corn second crop. Initially, the agricultural media, once again, sought to create an environment of rising prices to producers, using the catastrophe in Rio Grande do Sul. The information did not offer any sequence to the market because, as we reported, the entire crop of Rio Grande do Sul had already been reaped, and the key issues now refer to regional logistics in the mountainous region of the state. Again, the market turned to the climate in second-crop regions, in an attempt, once again, to create a bullish environment.
For the second crop, we have the following design:
– In Mato Grosso, Goiás, and Matopiba, the second crop situation is calm. Even with the lack of rain in May, which is completely normal, earlier planting this year in a large part of the second crop guarantees successful production. Now, it is a matter of harvesting and checking yields;
– In Minas Gerais, there were no rains in May, and it seems that they will not occur until the end of the month. A portion of the area was also cultivated early and is not at greater risk of loss. However, we have many crops undergoing pollination and silking amid the high temperatures of May, and losses will occur in productivity potential, despite the appearance of crops being healthy so far. Perhaps, sorghum yields will not repeat the results of 2023 either;
– São Paulo has been going through the same situation, only with occasional rains at the beginning of May. The west side is more sensitive to this climate condition, but other growing regions are already experiencing losses. Small, poorly-formed ears, not completely filled, pollination failures, that is, all the factors of a drought. Both corn and sorghum will cope with productivity losses;
– In Paraná, the situation is quite regular between Campo Mourão and Foz do Iguaçu, with the harvest expected to begin at the end of the month. However, the northwest and north region did not receive rain in May, and the situation, which was already difficult, has become
more complicated. Very irregular crops with productivity below 60/70 bags/hectare should be the highlight of the harvest. Therefore, this is not a general situation in the state, but a portion of production;
– In Mato Grosso do Sul, perhaps the most problematic situation. The north of the state may suffer some loss of potential, not reaching maximum productivity with the drought in May, however, it received excellent rains in April and has water reserves to close production at a good level. The central region to the south of the state has a very difficult situation, with yields expected to remain below 50 bags/hectare even if the rains return from now on.
In general, therefore, there is a picture of losses between the north of Paraguay and São Paulo, but there are compensatory production regions that neutralize part of the losses. Production may still reach 80 to 83 mln tons, against 86 mln in the current projection.
It is clear that domestic demand will not absorb all of the second-crop production, even with the current profile of losses. So, the country will still depend on exports in the second half of the year to inhibit high carryover stocks. If domestic prices remain above export parity, sales abroad will be discreet and domestic warehouses will be full. The North Arc should see exports emerge, especially because bringing volumes to the south and southeast becomes more difficult due to logistics, so the ports in the North will have a corn flow in the second half of the year.
On the other hand, production losses in MS, PR, and SP do not compromise supply, without a doubt, but they do not allow exports of good volumes. Therefore, the market tends to be more competitive between domestic demand and export prices. For this reason, prices in Paraná and Mato Grosso do Sul still have difficulty aligning with the port at BRL 60 and showing a more aggressive selling flow. With the harvest of the second crop in June and July, could this situation align? The other alternative would be for the market in the South and Southeast regions to move forward with purchases in MT and GO, a region with a large supply from now on, and put pressure on other nearby locations to drop prices. This movement will depend on the attitude of domestic consumers and the appeal of trading companies for exports. If they are concentrated only in the North Arc, perhaps Brazilian sales this year will be of only 30/35 mln tons. If the flow advances in PR, MS and SP, perhaps 40 mln tons. We therefore continue to focus on the flow of exports, as just second crop losses are not enough to generate internal shortages.
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