Porto Alegre, May 2, 2023 – The factor that has most scared the domestic market of corn and even consumers is the speed of decline in domestic prices. Corn has this characteristic of establishing large cyclical movements. However, the market did not expect such a strong and rapid decline. The fundamentals are based on what we have already discussed here every week, that is, the excess retention of soybeans in warehouses, the lack of space in logistics, and the decisions made by growers to sell corn. We can add the great yield of the summer crop and the appreciation of the real as additional factors. Now, the decline in port levels offers the final ballast for the domestic price realignment.
The weather for the 2023 corn second crop is going very well. Rainfall of 10 to 90 mm for the last ten days is contributing a lot to the development of plantations, many of which are already in the pod-filling phase in Mato Grosso and Goiás. In Paraná, Mato Grosso do Sul, Paraguay, São Paulo and Minas Gerais, the rain is routine and very favorable for the crops that are beginning to enter the pollination and silking stage. There is still the risk of frosts in May and June due to later planting in these locations.
Indeed, there is a stronger cold front coming into Argentina this week. However, the models do not reveal the possibility that such a front will reach the second crop region to bring any risk to crops of corn. Market agents should distinguish false information from real risk. Last week, the cold front forecast for this week in Argentina was brought forward by market agents to influence the B3 futures prices. The attempt was not consolidated because the front did not pose real risks to the second-crop regions of Brazil.
Meanwhile, prices in ports collapse and drag away second-crop levels. The sharpest decline in prices on CBOT, now dangerously breaking the important support of USD 5.50/bushel, together with the dollar falling below BRL 5.00, put Brazilian export prices at BRL 63/65 at the close of the week, in some more extreme cases at BRL 60/62. If we have an annual surplus of 40/45 mln tons, at least, warehouses are crowded with soybeans, ports are occupied by soybeans, and growers do not want to get rid of soybeans, corn will have to find the port levels to get liquidity for its flow.
It is at this point that price lows have scared everyone, even consumers. With continued lows, consumers also do not accelerate business with the fear of paying too much today in comparison to tomorrow. Prices decline, and the regions that have earlier harvests and lack alternatives to flow corn between May and August need to speed up sales to the domestic market. All of this contributes to what is happening.
Prices for the second crop over the week dropped from BRL 40 in Mato Grosso, BRL 45/47 in Goiás, BRL 43/45 in Mato Grosso do Sul, and must reach BRL 50 in Paraná and São Paulo. The fear of frost still holds selling pressure in the states with climate risk. But Mato Grosso and Goiás have started to accelerate sales. Also in Matopiba, prices are starting to decline quickly. Summer harvests in Bahia, Piauí, and Tocantins accelerate the fall in prices. Trades for May were already carried out at BRL 52/54 in Piauí, BRL 65 in Bahia, and quickly dropped to BRL 60 in Tocantins.
Going forward, this CBOT volatility, which can drive the December expiration to levels below USD 4.50/bushel, and the possibility of the dollar seeking the range of BRL 4.70/5.00, create difficulties for a reversal of pessimism about corn prices. The weather is still a big variable.
Follow the Safras Agency on our website. Also follow us on our Instagram and Twitter and stay on top of the main agribusiness news!
Copyright 2023 – Grupo CMA