International market of corn maintains prices supported

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     Porto Alegre, November 30, 2021 – Most markets had preventive pressures due to the new coronavirus variant. However, among the few commodities that resisted the day of global panic, corn ended the week with a slight increase. Structural factors could have kept the market sharply lower, such as lows in both wheat and oil. It was hard to assess markets at the close of the week, and a rise in corn would only be justified by a possible retraction in oil supply, already discreet, due to lower prices, which would boost the demand for ethanol. Overall, the key point is attention to the weather in the winter crop in the Northern Hemisphere, due to wheat, as well as in Argentina because of global supplies in the first half of 2022.

     While world stocks traded sharply lower like most commodities, after detecting the new coronavirus variant in South Africa, corn reversed the bearish movement in Friday’s trading session. The reasons why corn closed higher on a day of global panic were unclear. The first point is that wheat followed the session downward, after a week with quite moderated prices, and this, directly, would be a bearish factor for corn on the CBOT. But corn does not seem to have obeyed this wheat movement last week.

     The other point is that oil felt much more the risk of a new global economic and social standstill. Oil dropped by nearly USD 10 a barrel on Friday to USD 68 a barrel. In a direct and practical way, the decline also affects gasoline and ethanol prices. Therefore, that would not justify the support movement for corn either. The only possible variable in this demand segment is the effect of low prices on oil production. Could a new cut further reduce global supply and cause shortages in such a way as to favor greater ethanol production? In fact, we had a very confusing closing of the week, with erratic movements and panic about a new wave of economic and social paralysis.

     At the same time, general information continues to advance. The weekly US corn shipment was the best of the business year with 1.43 million tons. The market still expects positive demand factors, be it from the ethanol segment or in alternatives to the expensive wheat currently available in the market. It is also believed that the main support point for corn prices so far is the expectation that at any time China will resume purchases and cause a strong upward movement on the CBOT.

     The theory of decline in the area planted with corn in the next US crop, for now, seems to be more of an exercise than a practical framework. Costs have gone up, indeed, like all over the world. Perhaps, costs rise from USD 2.90 to 3.70 a bushel with the input highs. However, the December 2022 contract is currently set at USD 5.60/bushel, which seems to cover margins from any cost increase registered so far. Very high wheat prices can actually take corn and soybean areas in the Plains. However, in other regions, the theory of greater soybean planting at the expense of corn seems not to be realistic yet, especially if Argentine production brings down soybean prices on the CBOT.

     Agência SAFRAS Latam

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