Porto Alegre, July 18, 2023 – Safras & Mercado released its traditional planting intentions report for the 2023/24 crop, besides the update for the 2022/23 crop. This 2023 second crop has been updated to a new record of 100 mln tons and the national output to 139 mln tons. These numbers leave a question for the arrival of the 2024 crop, that is, the space in warehouses for the soybean crop, which promises to be a record again with the presence of El Nino. After three years of losses with La Nina, the risks of the summer corn crop are reduced for 2024. However, the price scenario, even with cost reduction, is not encouraging for growers. As a result, a further 2.5% cut in planted area is expected for the summer crop. The possibility of a large crop still in 2024 is evident and, for this reason, there are additional concerns with logistics and export flow.
The Brazilian 22/23 crop begins to be defined with data from the second crop in the Center-South and Matopiba. It is important to reflect on some points for this year’s production:
* The plantings of the 2023 crop were late, but with rains extending into the fall and collaborating for excellent development. Only in the northern region of Minas Gerais and southern Tocantins there was an earlier cut in rainfall, with potential production losses in later plantings;
* The incidence of pests was not significant in this second crop, which was the big surprise of the year, perhaps because of the better use of hybrids and greater control by growers;
* The risk of frost was greater for Paraná and Mato Grosso do Sul, especially because most of the planting was carried out in March. But the climate change from La Nina to the onset of an El Nino seems to have removed the region’s frost events in June and July. So, the second crop is fully safe and just waiting for the due period of maturation for the harvest;
* Matopiba with good production again in Tocantins, Maranhão, and Piauí.
In the set of factors amid technology, climate, and planting periods, we have a second crop of record yield. In most regions, where the harvest is going on, yields are above 130 bags/hectare. Probably, in the second half of the harvest in each region, the averages may decline a little. Thus, we are adjusting the second crop in the Center-South region to 100.1 mln tons, besides just over 11 mln tons in Matopiba. However, there was no data on the planted area and/or yield to reach a second crop in Mato Grosso above 50 mln tons so far.
Brazil’s 22/23 crop is now estimated at 139.4 mln tons, against 120.2 mln in the 21/22 crop. The new record really needs plenty of attention from growers and the market for storage at the beginning of the 2024 crop, given that, no matter how high the internal demand becomes until January, we will still have carryover stocks of more than 12 mln tons, the highest since 2018. Exports continue with an optimistic focus on 50 mln tons and will depend to a large extent on their competitively low prices against the US crop from September.
Despite the excellent results of 2023 in terms of production and the sharp decline in the prices of nitrogen fertilizers, there is no enthusiasm for maintaining or recovering the area planted with corn in this 23/24 summer crop. Market prices and the symptom of oversupply have not motivated growers to plant a large corn crop either. So, regionally the decision movements are starting and, initially, in favor of summer soybeans rather than corn.
In Rio Grande do Sul and Santa Catarina, due to the crop rotation cycle and local demand profile, the movement of the area to be planted suggests small variations. But, soybeans, of course, will have preference in regions of both states. Southern and southwestern Paraná may still have some area decrease in favor of summer soybeans. In this case, the necessary crop rotation in the region still weighs.
In São Paulo, Minas Gerais, and Goiás, there is room for larger cuts in the planted area. Other regional crops and even soybeans can absorb the area planted with corn. It is possible that growers retain corn from the 2023 crop in silo bags to sell it in 2024 and do not plant corn in the summer or reduce its area. In this case, in favor of soybeans. In the Midwest and Bahia, the summer areas are small, and the cut will have little influence.
In general, therefore, the 23/24 crop has a bias toward some cuts in the area planted in the summer and, possibly, in the 2024 second crop, due to the basic condition of market prices. Nothing that could still compromise the 2024 supply, especially with production starting to be estimated at 137.4 mln tons.
We also increased sorghum production for 2023 due to the larger planted area and excellent yields. Now, production is estimated at 4.3 mln tons for this year and is already being reaped.
From the point of view of the Brazilian supply and demand scenario, the first major mission is to free up space for the 2024 crop arrival in January. The big local concern is the outbreak of avian flu, now detected in a subsistence farm in Santa Catarina. The emergence of new cases may imply the closure of certain markets such as Japan and other regions more sensitive to this issue. Besides the sector’s profitability crisis due to oversupply, the avian flu environment may determine the reduction in chicken housing, which implies lower internal demand.
Therefore, the impact for corn is a cut in demand with the arrival of avian flu. The theory that there would be retention on farms waiting for improvements in export conditions, and this could increase the demand for corn is a pure lack of realistic bias. More sorghum at low prices also motivates the replacement of corn and is one more point to curb domestic demand. On the side of the ethanol industry, no problem so far, already with new factories about to start operations this year.
Exports got off to a good start, with 1 mln tons shipped in June and nearly 7 mln tons scheduled for shipment in July. The first ship appointments have started for August, which must be a month of big shipments. With shipments made since February and schedules already aligned, Brazil has 15 mln tons committed to exports so far. Owing to the size of the domestic supply, we raised our export projection to 50 mln tons. Depending on the flow, the effective volume may be higher or lower.
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