Brazilian market of corn remains firm at the start of the business year

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     Porto Alegre, January 25, 2021 – The Brazilian domestic market shows a reasonable effort to control prices in this transition of the business year. As importing is still very difficult to offset domestic prices and the harvest in Brazil has been slow, the game of commercialization becomes fierce every week and imposes certain volatilities that can distort the reality of domestic supply.

     China has just approved the opening of another commodity futures exchange in a province with strong regional consumption. Brazil has not yet managed to make its soybean futures contract work properly, despite being listed on the BM&F. Today we have only a mirror contract, with some liquidity, and two contracts that try to reflect Brazilian soybeans on the CBOT. The top soybean grower and exporter is unable to produce its own soybean futures contract, at least one that reflects the domestic price reality in Brazil.

     After great progress in terms of liquidity, corn has become the best commodity futures contract in operation in Brazil. However, it has many variables of concern for its future, such as the alignment of the liquidation of contracts by physical price indices, which are aligned with averages that do not always reflect the reality of the physical market.

     Brazilian corn futures also seem to rule out clear upward movements in the composition of the index, perhaps due to the collection system that prioritizes the prices of buyers rather than the deals closed during the business day. For example, last week some trades were registered in the Campinas region at BRL 88 CIF in cash, but the BM&F’s official indicator did not get even close to that reality. However, bearish movements are fast and accurate for that indicator. This shows that we still need to significantly improve the corn futures contract in Brazil, otherwise they run the risk of having the same liquidity losses as already happens with the soybean and fattened cattle futures contracts.

     Agência SAFRAS Latam

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