Jun 11, 2020
Conab Lowers Brazil Corn Estimate, Corn Prices Decline in Brazil
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
In their June Crop Report, Conab lowered their estimate of the 2019/20 Brazilian corn crop by 1.3 million tons to 100.9 million. They lowered their estimate of the safrinha corn production by 1.6 million tons to 74.2 million. Dry weather in the southern production areas was the primary reason for the lower safrinha corn production.
The safrinha corn in Mato Grosso was approximately 5% harvested late last week according to the Mato Grosso Institute of Agricultural Economics. The safrinha corn in Parana was 3% harvested earlier this week according to the Department of Rural Economics (Deral).
During the last 30 days, the price of corn at Brazilian ports declined R$ 9.00 per sack from R$ 53.00 per sack (approximately $4.80 per bushel) to the current R$ 44.00 per sack (approximately $4.00 per bushel). The reason for the decline was the strengthening Brazilian currency in relation to the U.S. dollar. A month ago the real was trading at almost 6 reals per dollar and it is now trading in the range of 4.9 reals per dollar. The spot price of corn last week in Mato Grosso was R$ 35.57 per sack (approximately $ 3.25 per bushel).
Even with the recent declines, corn prices in Brazil are still very attractive and producers have already sold approximately 50% of their anticipated 2019/20 production. It is possible that domestic corn prices could strengthen later this year if the Brazilian currency weakens compared to the dollar or if the price of corn increases on the Chicago Board of Trade.
Brazilian corn exports will resume during the second half of 2020 with Brazil expecting to export approximately 30 million tons of corn. The domestic demand for corn should also support prices during the second half of this year. The livestock sector remains active due to strong demand for meat exports, especially from China. Additionally, a significant amount of ethanol in Brazil is now produced from corn and while ethanol demand declined 40% due to the Covid-19 pandemic, it is expected to pick up later this year, thus further supporting corn prices.