Feb 28, 2020

Domestic Corn Prices in Brazil 20% Higher Than a Year Ago

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

While Brazilian farmers are in the midst of planting their safrinha corn, they are also watching domestic corn prices in Brazil. According to the advisory firm Scot Consultoria, the month of February is closing with domestic corn prices in Brazil 20% higher than they were one year ago.

In the Brazilian interior, available corn supplies are being priced in the range of R$ 45 to R$ 50 per sack (approximately $5.00 to $5.50 per bushel). This is about R$ 10 per sack (approximately $1.10 per bushel) higher than last year, which was already a high corn price.

A number of factors have contributed to the higher prices including: record corn exports in 2019, historically weak Brazilian currency, a strong demand for corn from the livestock sector, and increased use of corn to make ethanol in Brazil. All of these factors should remain in place for at least the first semester of 2020, so prices are not expected to weaken until farmers start harvesting their safrinha corn in June and July.

Even then, the extent of the price decline will depend in part on the size of the 2019/20 safrinha corn crop, which represents over 70% of Brazil's total corn production. The end of February marks the closing of the ideal planting window for safrinha corn, but approximately 50% of the corn will be planted after February, which increases the risk factor for the crop.

The weather during March, April, and May will be the determining factor for the safrinha corn and the weather during early March is expected to be dryer than normal in the southern production areas of Parana and Mato Grosso do Sul. If this forecast verifies, it may result in less than ideal plant populations for the newly planted corn.

In addition to potential lower prices once the safrinha corn comes onto the market, domestic corn prices in Brazil may also be pressured if U.S. farmers go ahead and plant the 94.0 million acres of corn in 2020 estimated by the USDA, which would be an increase of 4.3 million acres compared to 2019. If the U.S. has a good growing season in 2020, the already burdensome U.S. corn carryover could increase even further adding additional pressures to the international corn price.

In contrast, the Brazilian currency continues to weaken compared to the U.S. dollar which tends to support commodity prices in Brazil. The Brazilian real is currently trading in the range of 4.48 reals per dollar, which is yet another all-time low for the currency compared to the dollar. A weak currency makes Brazilian exports more competitive in the international market.