Porto Alegre, December 22, 2020 – The Brazilian corn market has a month of December with the highest record of regional offers. This better selling intention by growers helps consumers to replenish stocks for this period and, in some cases, for the beginning of January. Of course, not everyone can take advantage of this moment of pressure on corn prices to stretch stocks, also because of lack of space. However, we have to reflect that this supply movement will end and encounter logistical difficulties in February and March, at least, for the trade flow of corn at a time of focus on soybeans. Basically, a discreet summer crop leads us to a six-month trajectory of effort in domestic supply, in our analysis being negative for the semester, which naturally leads us to imports. The question is: how to import corn amid the peak of the soybean harvest?
The weather in December has been much better for Brazilian crops. It was not yet possible to recover the best of soil moisture conditions, but the rain returned in most regions, after a difficult spring in terms of rainfall and with losses of corn in the South region, and soybeans in Mato Grosso. The crop is still in progress and delayed, still generating expectations with the weather in January and February in a good part of the country.
Corn crops are now developing well in the center-east of the South region, confirming the strong losses in the midwest of Santa Catarina, and Rio Grande do Sul. In the other states of the Center-South, the picture of the summer corn crop is now quiet with good crop development but with a later harvest. As soybeans also delayed the planting, the harvest will be concentrated mainly in February and March. Owing to logistical issues, corn is likely to be reaped later, after the month of March in the Southeast and Midwest. This picture may have a major impact on corn prices mainly in the first quarter.
In the South region, the environment is of confirmation of losses on the west side and renegotiation of contracts that would have corn deliveries for January and February. These contracts will not be fulfilled due to local crop losses. This will not be able to be compensated by the production of other locations of Rio Grande do Sul and Santa Catarina. In fact, much of the demand that would be concentrated in the west of these states will eventually flow into purchases in other regions. For Paraná and Mato Grosso do Sul, it will be quite difficult in February and March to continue putting large volumes in other southern states due to the flow of soybeans.
The second corn crop planting will follow its normal schedule predicted for February and March. It will not be a date desired by farmers, but the possible period in a year of late summer crops. With soybeans being reaped later and in a concentrated manner, the question of logistics will weigh on the flow of corn in the domestic market. The later planting of the second crop may generate a speculative picture in the first semester with the fall/winter climate.
In Argentina the situation is starting to worry. The planting is quite delayed and reached only 68% of the area planned for this year, according to the government, which forecasts a planted area of over 9 million hectares for this year. However, the market does not seem to accept these government figures. The Buenos Aires exchange predicts an area of ??6.3 million hectares, that is, very different from the one indicated by the government. Planting, according to the Exchange, reached only 55% last week. Soil moisture conditions are not favorable at this time, with rain being concentrated only in the north of the country and not in the core region, Santa Fé, Córdoba and Buenos Aires.
Domestic sales in December reflected the farmers and sellers’ need for emptying warehouses, making year-end cash, and preparing for the soybean harvest that will begin in February. This concentrated selling pressure has helped domestic prices to settle down over the past three weeks. The question now is the resumption of business in January and whether farmers and sellers in general are willing to exert the same pressure of continuous sales as they have in recent weeks.
There may be a strong resumption of purchases in January and a strong halt in sales as the soybean crop approaches. The harvest of Rio Grande do Sul and Santa Catarina that generally supply the local market in January and February, it seems to us that they will not meet 30% of the local demand in the period. São Paulo and Minas Gerais are unlikely to have summer crop offers in January, but in February the soybean harvest in São Paulo begins with concentrated logistics.
Brazilian exports reached 33 million tons, between shipments made and those already scheduled for December and January. December has excellent shipments of 4.4 million tons. January has a schedule of 460 thousand tons so far. The number is close to the estimate for the year, of 34 million tons, and there seems to be no surprise as to the closure of the annual number for 2020.
Agência SAFRAS Latam
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