Porto Alegre, September 12, 2023 – While international prices do not change and await the USDA’s report this week, international demand for Brazilian corn, before the US harvest, is very significant. September is now moving to a potential shipment of 9 to 10 mln tons again. These are new records generated by Brazil this year and continue to be the major factor in the formation of domestic prices. On the one hand, the arrival of the final phase of the harvest in Brazil and a large part of the production already allocated to warehouses
and silo bags. On the other, a very favorable external demand for Brazilian corn. China carried out a record shipment of Brazilian corn in August, with 2.3 mln tons, and has been the central point for the Brazilian result. This volume will likely be repeated in September.
The Brazilian 2023 second crop is coming to an end, with 95% of the area reaped. Basically, depending on the weather, work will end in the next few days. Record productivity for a second crop, full warehouses, many silo bags on farms and around warehouses. Nothing new in this information. However, what has changed with this environment of harvest completion is the corn allocated and now with less sales pressure by growers, who are still hoping that a major loss of production will arise in the United States to boost prices or something that will change the trajectory of prices. Perhaps the USDA report can definitively align such expectations.
On the other hand, the rains arriving in good conditions allow for an excellent planting pace. The floods in Rio Grande do Sul at the moment have little or no effect on corn crop conditions, perhaps causing losses for wheat later. But the west of the state, which already has a large part of the crop planted, has no negative impact with the rain. Santa Catarina and southern/southwestern Paraná are already making strong progress in the summer planting. With this planting profile, we will have corn being reaped in January and February in the three southern states.
Now, the focus is on the Southeast, where it will be important for planting to advance from now on, with a focus on harvests in February and March. However, there is an environment very averse to planting corn in the summer in São Paulo, in particular, with many growers switching from corn to soybean areas. Minas Gerais and part of Goiás should follow the same strategy, perhaps in smaller proportions.
This configuration between the current pace of Brazilian exports and the planting of the 23/24 summer crop is fundamental for shaping prices going forward. With the strong soybean harvest that is shaping up, it does not seem difficult that storage problems proportional to 2023 will re-emerge in the Brazilian harvest in the first half of next year. So, if there is a large volume of corn in warehouses or being reaped, it will be natural for us to also see some sales pressure in the first quarter. Rio Grande do Sul, for example, which is expected to recover its corn production after three years, will also need space for wheat in December, for corn in February and March, and for soybeans in April and May. This need could supply the local market and even Santa Catarina in the first quarter of the year.
The Southeast and Midwest will largely depend on the arrival of the Minas Gerais crop from April as well as on the producer’s decision to sell either corn or soybeans. However, the space difficulties will be the same.
In any case, the 2023 picture of corn sales pressure in the first half of the year cannot be fully associated with the 2024 profile. Other factors, other climate indicators, other international variables, and, mainly, internal logistic difficulties and lower acreage in the summer. Highs in the first half of 2024 can be seen as a normal environment for areas such as the Southeast and Northeast of the country.
In this context, exports continue to be the key point for domestic prices. Internally, there is no sign of a contraction in demand, in the animal or ethanol segments. Therefore, believing that this context will hold back prices due to domestic demand is unrealistic. Exports, however, are a delicate point. Their excess may bring short carryover stocks while a slowdown, from October onward, could bring internal selling pressure due to loss of external liquidity.
At this moment, Brazilian exports continue at full steam and with record shipments. In August, the record was 9 mln tons actually shipped, with Secex bringing the number of 9.4 mln tons. This volume of shipments was only possible due to the huge shipment made by China of around 2.3 mln tons. In short, in July and August, China made a difference in the volume of shipments made by Brazil.
In September we have a line-up of around 10.5 mln tons. Probably, shipment will end close to the August volume, at 9 mln tons. Again, we will see China with shipments close to 2 mln tons of Brazilian corn. October, however, has a weak pace of scheduled purchases in Brazil. Could it be a sign that from this month onward China will resume its purchases of US corn? Probably, but we must understand that the major demand factor for Brazilian corn in the last three months has been China, which is in its off-season and will also begin its regional harvest in October.
The fact is that Brazil is within the scope of global demand, and until February this demand has this origin and the United States to supply it. Now, the question is the arrival of the US crop and its export pace. Brazilian stocks for 2024 will be determined by this pace of exports until January, as well as the pressure on domestic prices at the turn of the year. As a consequence of the need to free up warehouses for the new season, this sales pressure will be determined by the pace of flow of domestic supply for exports.
These strong shipments in September, together with the end of the regional harvest of second-crop corn, made some trading companies rush after purchases last week. Perhaps some fear about the exchange rate or the USDA report accelerated the pace of purchases to meet this demand at ports in September. Many deals for immediate shipments, but with October prices, that is, BRL 55/57 FOB in the interior of São Paulo,
for example, with payment in October. Also in Goiás, between BRL 45/48 and in Minas Gerais BRL 50/51 for September and October payments. Routine situations that growers need to be aware of, as they may only be temporary, especially before the US harvest.
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