With the harvest of the 2023 second crop completed and the good planting progress of the summer crop, even with a reduction in area, we do not see a major bullish factor in the Brazilian market. However, seasonally, the price movement for the last few days in the domestic market must be considered normal due to the end of the harvest and the sales pressures in the interior, at least at this moment. Until January, however, the domestic market will need to find space for the arrival of the new soybean crop, and the point that balances this concern is, in fact, the flow of exports. Soybeans have been confirming record shipments this year, thus emptying warehouses and preparing for 2024. Corn is surprising with strong export shipments and helping to empty stocks. As we have pointed out, China has accounted for major Brazilian sales this year, and shipments in September hit 3.3 mln tons, a historic volume.
The harvest of the 2023 second corn crop has come to an end, confirming excellent productivity and record production. This condition has allowed Brazil to face the global situation so far with internal security of supply. Now, the planting of the summer crop is advancing in the Southeast and approaching the final stretch in the South. Excessive rain in the South, for now, is not a problem that can affect corn crops, however, there is no doubt that it will affect the quality of the wheat crop, with a greater supply for feedstuff use.
With the good progress of the summer planting, we must estimate that harvests will begin in Rio Grande do Sul and far west of Santa Catarina in mid-January, of course depending on the rainfall during the period. In the Southeast, harvests for February/March, with crops cultivated with irrigation expected to appear in January and February. The crop in Goiás, which has better regional representation, will appear from March. The rains have improved every week. In recent days, they have advanced in the Southeast, parts of Goiás, and the Vale do Araguaia, a region that is still very dry at the moment. These occurrences are breaking the pocket of drought in the Midwest and preventing the situation from becoming more problematic from now on.
NOAA continues to not indicate a situation for a super El Nino in the 23/24 cycle. In fact, it points to a peak of El Nino at the turn of the year and a loss of strength from May 2024. So far, temperatures reached 1.3ºC above average, in the last official quarterly measurement. A super El Nino requires temperatures above 2ºC above average. Therefore, we are far from seeing a direct correlation between the current phenomenon and what occurred in 2016, when temperatures reached 2.6ºC above average, the most intense phenomenon of the last 30 years. Therefore, the drought in the Amazon seems another evolution and consequence of the neutral climate of the first half of the year and has little to do with the arrival of El Nino.
Between this planting environment and harvest schedules, we have the internal supply. The first point is that the crop in Rio Grande do Sul tends to generate a good supply condition for much of the first half of the year in the South of Brazil, even with a cut in the planted area in Paraná. The good supply of wheat for feedstuff in the coming weeks and the good supply to be sold by Paraguay tend to guarantee regional supply. The Southeast has a slightly longer cycle, as does the Midwest, and will depend heavily on corn stocks from the 2023 season to meet demand in early 2024 until harvests are established. The Northeast may suffer a little more with the price situation in the first half of next year due to potential crop problems in Bahia and lower carryover stocks in the region for next year.
Brazilian carryover stocks, of course, have a direct relationship with domestic demand. There are no surprises in the projections of domestic demand in the ethanol and meat segments. Some consulting companies, once again mistakenly, projected cuts in the housing of breeding chicks, for example, for this second half of the year. What we now had in August was the housing of 602 mln head, a record for the month. Domestic demand, therefore, is within projections.
The point that is really surprising and, in this case, will make a difference in carryover stocks, is exports. The record of 47 mln tons in 2022 was the result of a strong external situation, which generated significant demand and high prices for Brazilian corn. We do not have the same situation in 2023, and prices have dropped significantly. However, China is taking advantage of its renewed health agreement with Brazil to make heavy purchases of corn. In part, China has a harvest delayed by the rains and is supplying itself within its seasonal import period. On the other hand, purchases made in Brazil are within its annual import schedule of 18.5 mln tons, according to the Chinese government, or 23 mln, according to USDA.
It is understood that the trade situation between the United States and China remains in conflict, and China is trying to absorb the greater volume of Brazilian corn, thus reducing purchasing needs in the United States. Meanwhile, the United States awaits China’s entry as a bullish factor for the CBOT. The fact is that China made its largest shipment of corn to Brazil in October, with 3.3 mln tons, totaling 6.9 mln tons this business year. Based on shipment schedules ahead, sales to China this year could reach 12 mln tons. Consequently, there will be little left for this country to import US corn.
In this environment, Brazil now arrives with an export commitment of 40 mln tons, considering the appointments already present in October and November. As we have until January to close the business year, if November exports exceed 6 mln tons, we will increase the forecast for the year beyond the 55.2 mln tons currently projected. The fact is that high prices on the CBOT and premiums in the Gulf of Mexico, in addition to the recent devaluation of the real, favor Brazilian exports.
For the domestic market, this flow changes the projection of carryover stocks and creates an environment of price support for the domestic market. As exports are the central point for balancing domestic prices, huge exports will bring some recovery to domestic prices. The US crop has not yet exerted its pressure on international prices, and this could still influence prices in Brazil. The moment requires attention from internal consumers and opportunities for growers to sell the corn still in warehouses.
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