Jun 13, 2016

Corn Priced Decline in Brazil due to Initial Harvest Pressure

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

As the initial safrinha corn harvest gets underway in Brazil, domestic corn prices are declining in the face of the early harvest pressure. The corn supplies in Brazil have been extremely tight for several months prompting livestock producers and feed manufactures in southern Brazil to import corn from neighboring Paraguay and Argentina. The situation is expected to be normalized over the next few weeks, at least temporarily, as additional corn supplies come onto the market.

The Mato Grosso Institute of Agricultural Economics (Imea) estimated last week that the safrinha corn harvest in the state was 3% complete with a few areas where 20% of the corn had been harvested. The Department of Rural Economics for the State of Parana (Deral) reported last week that 3% of the safrinha corn in the state had been harvested. The cold temperatures recorded last week in the state of Parana probably ended the growing season in most of the state and the corn will now advance quickly toward maturity.

As you would suspect, domestic corn prices in Brazil are declining in the areas where the corn harvest has started, but they are still much higher than a year ago. Below is a list of some of the price movements over this past week. As a reference, R$ 30 per sack equates to $3.90 per bushel and R$ 40 per sack equates to $5.20 per bushel.

In their June Report, which was released last week, Conab reduced their estimate of the 2015/16 safrinha corn crop by 2.9 million tons from 52.90 to 49.99 million tons. As a result, corn prices are expected to stay supported in Brazil due to the much smaller than expected safrinha corn crop. Corn supplies are expected to turn tight again later in 2016 which could result in reduced corn exports from Brazil. In fact, the National Association of Grain Exporters (Anec) recently estimated that Brazil will export 23 million tons of corn in 2016, which is significantly below their prior estimate of 30 million tons.