Porto Alegre, January 8, 2024 – The international corn market begins to shape itself for the 2024 cycle: the performance of the Argentine crop, the configuration of Brazil’s 2024 crop, and the planting of the US crop. At the same time, the movement in wheat prices and the result of US corn exports this semester will be fundamental. In the short term, however, the performance of the Argentine crop, wheat prices, and US exports set up the main points for price formation on the CBOT, which reached new lows at the beginning of 2024.
Prices on the CBOT are reaching new lows for the March contract. USD 4.60/bushel is close to the low for March/24. The expectation was that December maturity could reach USD 4.20/4.30 a bushel, still above average, but the lowest level since the beginning of the pandemic. Therefore, if we evaluate prices today they are still above the historic USD 3.50/3.80 a bushel on the CBOT. The issue is that many inputs have not yet returned to pre-pandemic prices, and today prices are resistant to stronger lows due to production costs.
This will be a preponderant item, along with crop rotation, to determine the planting of the 2024 US crop. The 2023 crop was planted at high costs but with corn prices between USD 5.00/6.00 a bushel. The current exchange ratio between corn and soybeans is much more favorable for soybeans for US growers, and therefore the trend for planting the 2024 crop is of recovery in the soybean area and a decline in the corn area. If we look at the November soybean contract on the CBOT we will see that the market is now pricing in a larger soybean crop in the US in 2024 and not the other way around. And this is one of the reasons why soybean prices also fail to rally on the CBOT, that is, a larger crop projected for 2024 and a full recovery of Argentine production. Corn with recovered stocks and Argentina back to full sales do not help encourage a large corn planting.
So, we will now see US consulting companies project this design, that is, a cut of 2 to 4 mln acres for corn and a proportional increase for soybeans. The cut in corn acreage should generate some positive environment for CBOT prices in March and April. It should be considered, however, that USDA has adopted initial projections of high productivity, above 180 bushels/acre, and can compensate for part of the area cut, at least before a more serious climate situation.
Before that, on the 12th, USDA will finalize the data for the 2023 US crop, with figures that can always bring some surprise. The routine focus for prices is now on weekly exports, which are much better compared to 2023. So far, nearly 29 mln tons have been sold in exports compared to 21 mln last season. The US needs a weekly average of 1 mln tons to reach the export projection of 54 mln this business year. Brazil’s exit from exports must help both the USA and Argentina in this first half of the year. Moreover, the observation is on the price of wheat, due to Russia’s export situation. If Russia reduces wheat shipments because of its off-season, wheat could rise again and help corn prices.
Argentina is heading toward closing its plantation this month fully within the ideal window and with a very favorable climate so far. However, planting is just finishing, and there will still be at least 60 critical days to define production this year. The projection of 55 mln tons puts the country back into the export environment for 35 to 40 mln tons in 2024, compared to 23 mln tons last season. Of course, this resumption of sales flow with a free market and devalued dollar will bring strong competition to US corn from March onward, as well as the arrival of Brazil’s 2024 second crop from July.
Argentina has importers in common with Brazil, such as Europe and part of Asia. These importers will have the Argentine option this year, which did not happen in 2023. Therefore, the arrival of the Brazilian second crop may already be affected by this Argentine presence in international sales. Thus far, Argentina has registered 7.5 mln tons in exports of the new crop, compared to 6.8 mln last year. This sales volume is expected to increase significantly as the 2024 second crop is confirmed. Exchange rate and production are favorable in this sense.
Paraguay will have a lower area in the 2024 second crop of corn
Paraguay is already reaping its excellent 2024 soybean crop. The normal flow would be to move forward with the planting of the 2024 second corn crop, which will certainly occur from the middle of the month. However, this year, part of the area will suffer a reduction in corn in favor of second-crop soybeans.
Paraguay presented a record corn crop in 2023 of nearly 6.3 mln tons. With this volume, it has been possible to achieve significant export volumes. Between January and November, shipments reached 3.3 mln tons, out of which 1.2 mln tons went to Brazil, 300,000 tons to Argentina, and 1.78 mln tons to other destinations. The profile of Paraguayan sales has changed this year, with more sales to general destinations in comparison to the major buyer, Brazil. Argentina’s absence of exports is an important factor. With the return of Argentina in 2024, this model should return to Brazil as the central point of Paraguayan sales.
The planting of the 2024 second crop will be perfectly within the ideal window for the neighboring country. However, growers are not happy with the final corn price for the off-season and, despite Brazilian planting difficulties this year, they are deciding to plant second-crop soybeans, which is possible in Paraguay, and reducing the corn acreage. In this way, now we estimate the area must fall to 886,000 hectares, with a production potential of 5.68 mln tons. With the resumption of Argentine exports, Paraguay, even with a smaller crop, will be able to meet Brazilian demand in 2024 at the current projected numbers.
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