Porto Alegre, July 20, 2021 – Brazil’s 20/21 corn season is being defined with the harvest progress of the second crop. After updating the second crop and Matopiba production for 2021, we reduced the Brazilian general production to 90.4 mln tons. Indeed, a small crop given the profile of domestic demand and exports. For this reason, the Brazilian market is beginning to move towards imports, both for the South and Northeast regions. The equation now focuses on this flow of imports, while Argentina still has corn, versus the export flow.
At this point, July export commitments already reach 3.5 mln tons, while the imports announced last week do not outpace 300,000 tons. Amid all this, we arrive at the first vision for the 2022 summer crop, without reflections on a significant increase in corn acreage and with the presence of La Nina again. We will have another year of tight supply. What cannot be imagined is that only washouts will meet the internal demand, since exports at 20 mln tons already consider shipment cancellations due to production shortages.
Exchange rate volatility continued last week and remained in line with the external bias. Higher US inflation, the number of unemployment insurance claims coming in line with market expectations, and the symptoms of shortages of raw materials in some sectors of the economy continue to suggest to market agents that interest rates may rise again sooner than expected. The real, of course, followed this volatility. As the Fed holds markets with the expectation of interest rates without correction, the dollar falls abroad, allowing the real to appreciate. The US currency dropped below BRL 5.10 last week again.
Undoubtedly, the internal political variables that affect the recovery pace of the Brazilian economy continue. The political and ideological conflict ends up affecting investment decisions and capital inflow into the country, holding back the pace of economic expansion. If Brazilian GDP is growing 5% or more this year, even with these political obstacles, how much could the country grow without the political blockage promoted by both the Brazilian Congress and Supreme Court to the executive branch activities?