Jan 22, 2020
Corn Prices and Corn Sales in Brazil Expected to Remain Strong
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Mato Grosso Institute of Agricultural Economics (Imea) reported that farmers in the state have sold 99.4% of their 2018/19 corn production and that they have forward contracted 56.8% of their anticipated 2019/20 corn production compared to 40.6% last year and 36.5% for the 5-year average.
In the municipalities of Campo Verde and Primavera do Leste, which are both located in southeastern Mato Grosso, the current price of available corn is in the range of R$ 40.00 per sack or approximately $4.50 per bushel, which is a very good price for corn. The average statewide price for forward contracted corn during December in Mato Grosso was R$ 25.96 per sack (approximately $2.95 per bushel), which was up 10.4% compared to November.
According to the Superintendent of Imea, who was interviewed by Noticias Agricolas, the tight supplies of corn in Brazil should continue to support domestic corn prices even as the safrinha corn comes onto the market.
A study conducted by the Center for Advanced Studies in Applied Economics (Cepea), indicated that domestic corn prices should continue to be supported by the tight corn supplies. They combined the corn carryover from last season and the anticipated full-season corn production for this season, and it equated to approximately 56% of the yearly domestic demand for corn in Brazil, which is estimated at 68.1 million tons. As a comparison, last year those two sources of corn equaled approximately 65% of the yearly domestic demand for corn. Therefore, even with the harvest of the safrinha corn, supplies of corn in Brazil are expected to remain tight.
Imea is expecting farmers in Mato Grosso to plant 4.97 million hectares of safrinha corn, which would be an increase of 2.3% compared to last year. Imea is estimating that the average safrinha corn yield will decline 4.2% compared to last year to 106 sacks per hectare (7.9 bu/ac). If verified, this would result in a safrinha corn production of 31.6 million tons or a decline of 2% compared to last year.
One of the main reasons for the tight corn supplies is the fact that Brazil exported corn too fast while they took advantage of the trade dispute between the U.S. and China. With the signing of the Phase 1 trade agreement between the U.S. and China, Brazil's exports of corn and soybeans may be more difficult in the future if China follows through with its commitments to purchase more agricultural products from the U.S.