Oct 09, 2023

Exchange Rate Improves Outlook for Brazil's Safrinha Corn

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

Whenever a commodity such as soybeans or corn are priced in U.S. dollars but paid in the local currency like the Brazilian real, the exchange rate between the two currencies is important to producers. The stronger the U.S. dollar (or the weaker the Brazilian real), the more money a Brazilian farmer puts in his pocket when he sells his soybeans or corn.

The exchange rate between the two currencies over the past month as improved the outlook for Brazil's safrinha corn production. During the past month, the dollar increased 8% and the corn prices on the B3 Exchange in Sao Paulo increased 10%. Last week alone, corn contracts on the B3 exchange increased 4%. The devaluation of the real compared to the dollar, improved contracts at the ports and put upward pressure on Brazilian corn prices.

On the B3 exchange last Friday, January corn was R$ 64.57 per sack (approximately $5.66 per bushel), March was R$ 68.70 per sack (approximately $6.02 per bushel), May was R$ 66.87 per sack (approximately $5.86 per bushel), and July was R$ 65.00 per sack (approximately $5.70 per bushel). The spot price in Mato Grosso last Friday was R$ 35.00 to 45.00 per sack (approximately $3.10 to $3.95 per bushel) and the spot price in Parana was R$ 45.00 to 50.00 per sack (approximately $3.95 to $4.40 per bushel). These conversions were made using an exchange rate of 5.18 Brazilian reals per U.S. dollar.

Brazil's corn exports were strong in September and the line-up for October is approximately 10 million tons. Some analysts in Brazil are forecasting that Brazil could export as much as 60 million tons of corn in 2023. The strong export demand is also supportive of domestic corn prices.

The impact of the exchange rate and export demand has resulted in a more positive attitude toward the 2023/24 safrinha corn crop. Several months ago, Brazilian farmers' interest in the 2023/24 safrinha corn was at a low point and some indicated that they would reduce their safrinha corn acreage or forgo it all together. Now, that may not be the case. In fact, some analysts are advising farmers to rethink their plans for the safrinha corn considering the improved price prospects.