Porto Alegre, February 17, 2021 – The corn market has this expectation of consumers that, even during the strong soybean harvest, corn supply will improve. Of course, there is a summer crop that has been reaped and absorbed, but without enough volume to bring down prices, and this is the key point now. The rise in freight rates and with logistics concentrated on soybeans must drive buying interest mainly to short-term offers for corn, with potential for regional highs. The 2021 second crop remains too delayed. However, there is only one major component of climate risk for the fall in case of a planting carried out later. There is no loss of area in relation to the delayed planting, neither loss of production. The second crop continues projected with record potential.
The ‘information game,’ the actions targeted at operations on the BM&F, and the surprising lack of perception of production losses in the South region by Conab, are part of this context of record prices in this 2021/22 business year. Over time, the market has learned that controlling future prices on the BM&F can help to control prices in the physical market, just like already occurs with the fattened cattle market. However, market fundamentals always prevail, even with direct action on market indicators to contain price movements.
In fact, while the soybean harvest did not quite advance in the first half of February, growers still sold some volumes of corn to make cash to deal with the soybean harvest expenses. The need for emptying warehouses was already met in December and January. Therefore, current sales are aimed to get cash. These are not significant volumes, and we cannot say that the position of stocks held by the consumer sector would last long. Demand shows no sign of decline. On the contrary, with 570 million head in the housing of breeding chicks in January, there is no sign of decline in the corn demand.
Now the soybean harvest pace will run much faster until early April. The focus on the soybean harvest and logistics is a challenge for Brazil this year, mainly for the transportation of corn into warehouses. It seems to us that it will be more difficult to reap and offer corn right in the middle of the peak of the soybean harvest.
The other point is the planting pace of the second crop. The weather was much better in January and February, and there may be regional rain, mainly in Mato Grosso at least until March. Producers will now make strong progress in the soybean harvest and second crop planting. The peak of the second crop planting will take place this year between February 15 and March 15. Nowadays, agricultural machinery makes that possible. In any case, the profile of the second crop confirms the late planting. There is no sign there will be area losses due to the planting delay. In fact, the area will not only be larger because of this delay. So, the second crop will depend on the climate in the fall to define the size of production, since the area will be confirmed with a new record.
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