Feb 12, 2015

Safrinha Corn Production in Brazil can be Risky Proposition

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

The relatively fast harvest pace of the Brazilian soybean crop is resulting in a relatively fast pace for planting the safrinha corn as well. In Mato Grosso the safrinha corn is 12.7% planted compared to 16% last year and in Parana the corn is 25% planted. The corn planting in Mato Grosso is now behind last year's pace and the safrinha corn planting pace should slow down even more in the weeks ahead because the soybean harvest in Mato Grosso will not be as rapid when the harvest moves into soybeans planted after the dry weather last October.

The safrinha corn acreage is yet to be determined and Conab should report their first survey results concerning the safrinha corn acreage in their February Crop Report due out Thursday, February 12. Until then, I continue to estimate that the safrinha corn acreage will decline 5-10% and the safrinha corn production might decline 10-15% due to lower yields compared to last year.

Recently there have been several developments that could favor the safrinha corn acreage including: a relatively quick start to the safrinha corn planting, an improved weather outlook at least for the next few weeks, and lastly a significant reversal of fortune for the Brazilian currency.

Just recently we were talking about a strengthening Brazilian currency and how the resulting lower corn price could trim safrinha corn acreage. Today, it is just the reverse. The Brazilian currency has weakening significantly over the last several weeks and it is now trading at 2.78 reals to the dollar. Any weakening of the Brazilian currency is the same as a price increase for Brazilian corn farmers. Therefore, if the weather continues to improve and the currency continues to weaken, Brazilian farmers might plant more safrinha corn than what had been anticipated.

In addition to acreage, the eventual corn yields will determine the safrinha corn production and in that light, below you will find a chart comparing the acreage, production, and yields of first crop of corn and the second crop of corn in Brazil. The yields of the first crop of corn have been slowly improving over the years, but what is really striking is the improvement in safrinha corn yields over the last three years.

Brazilian Corn Production History - 2004 to 2014

First Crop CornFirst Crop CornFirst Crop CornSecond Crop CornSecond Crop CornSecond Crop Corn
Yearacreage mhaproduction mtyield bu/acacreage mhaproduction mtyield bu/ac
04/05 9.021 27.298 46.6 3.186 7.708 37.2
05/06 9.652 31.809 50.7 3.311 10.705 49.7
06/07 9.493 36.596 59.3 4.561 14.773 49.8
07/08 9.635 39.964 63.8 5.130 18.688 56.0
08/09 9.270 33.654 55.9 4.901 17.394 54.6
09/10 7.724 34.079 67.9 5.269 21.938 64.1
10/11 7.637 34.946 70.4 6.168 22.460 56.0
11/12 7.558 33.867 68.9 7.619 39.112 79.0
12/13 6.783 34.576 78.4 9.046 46.928 79.8
13/14 6.683 31.652 72.9 9.182 48.252 80.9

Source: Conab

Over the last three years, the safrinha corn yield has averaged 79.9 bu/ac, but if you look at the three years prior to that, the average corn yield was 57.5 bu/ac. The difference was an extended rainy season during the last three years. In central Brazil, the rains generally end about late April or early May, but for the last three years, the rains continued until late May or early June. The result was very good safrinha corn yields, in fact, the safrinha corn yields (79.9 bu/ac) were better than the first crop corn yields (73.4 bu/ac) for the last three years.

The point of this discussion is to illustrate that safrinha corn production in Brazil is a risky proposition and if the rains end at the normal time or even earlier than normal, the result can be a drastically reduced safrinha corn crop. Example - let's assume that the safrinha corn acreage remained unchanged in 2014/15 compared to last year, but the average yield is 57.5 bu/ac instead of the 79.9 bu/ac achieved over the last three years. The result would be a safrinha corn production of 36 million tons instead of the current estimate from Conab of 49 million tons, or a reduction of 13 million tons.

We should have a better idea about the safrinha corn acreage by early March when the planting ends and we will know more about the potential yields in late March or early April when there will be a better forecast concerning the end of the rainy season in central Brazil.