Brazil: Corn Prices Stumble Amid High Domestic Offer


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Sep 12, 2023 | Agricultural Markets News

Reading time: 2 minutes

In Brazil, the harvest of the second Corn crop started in Mato Grosso with concerns about storage due to the high production of grains this season, and the low prices worry farmers in the state. With stocks still full of soybeans and buyers waiting for even greater devaluations in the price of Corn, the expectation is that there will be an increasing lack of space in storage units, especially from July, when most regions will begin harvesting. If farmers continue with issues with storing the grains properly, they might be forced to sell at lower prices to avoid losses.

According to CONAB, grain storage capacity for the 2022/23 harvest is at 44.78 million tons, which represents an increase of 8.8 percent compared to the 2021/22 cycle. However, this season’s soybean and Corn production grew 7.15 percent compared to the previous crop, reaching 90.73 million tons despite this increase. The scenario reinforces the difficulty of storage for producers, which is already common in the Corn harvest.

According to the Mato Grosso Institute of Agricultural Economics (IMEA), farmers’ Corn crop profit margins have shown signs of concern. It will cost 10 percent more to plant a hectare of Corn in 2023/24 concerning the 2022/23 cycle. This increase occurs despite the drop of almost 2 percent in fertilizers and soil defensives. In the 2022/23 crop year, producers spent R$ 5,610.78 to sow one hectare of high-tech Corn, while the total cost is R$ 6,183.51 per hectare in the 2023/24 crop year.

If profit margins do not improve later in the year, farmers may change their plans for the 2023/24 safrinha Corn production, which will be planted from next January. Instead of Corn as a second crop, they may consider other grains, such as sorghum and sesame, or other specialty crops that are cheaper to produce.

Many farmers have started investing in building their own silos and storage space. Faced with the impossibility of acquiring new land to grow crops due to high costs or lack of availability, many farmers focus on improving their properties to reduce the bottlenecks and expenses resulting from logistical issues.

The Brazilian Association of the Machinery and Equipment Industry (ABIMAQ) estimates that the grain storage deficit in Brazil in 2023 will be 115 million tons. They estimate this will continue to rise on average by five million tons per year due to the increase in Brazilian production.

With lack of storage severely impacting prices, the federal government announced plans to create regulatory public stocks again to combat food inflation. For this, it will be necessary to restructure the storage network, including the company’s warehouses and those of accredited third parties. To stimulate the accreditation process for private warehouses, the company approved a 34 percent increase in the values of storage fees.

Brazil: Corn Prices Stumble Amid High Domestic Offer

Corn Price and Export in Brazil

Adding to the burdens of Corn growers, who are facing high production costs, Corn prices have been showing continuous declines and crossed the month of May at the lowest nominal levels since September 2020, according to data from the University of Sao Paulo Center for Advanced Studies in Applied Economics (CEPEA). The expectation of solid production, especially with the entrance of the second-Corn crop in July and negotiations being done mainly on the spot to avoid bottlenecks in the already complicated Brazilian logistical matrix, have contributed to a sharp decline in Corn prices.

On June 13, Corn was traded in the ESALQ/BM&FBovespa Index at R$ 54.07 (US$ 11.12) per 60-kilo bag, a sharp decline from the price trade on March 15, date of the previous analysis, when Corn reached R$85.49 (US$ 16.15) per 60-kilo bag.

According to the AgFlow data, Brazil exported 13.3 million tons of Corn in Jan – Aug 2023. Key markets were China (2.6 million tons), Japan (1.1 million tons), Vietnam (1 million tons), Mexico (0.9 million tons), and South Korea (0.6 million tons).

Other sources: USDA

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