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Brazil lifts corn output hopes to record, as high prices lure sowings

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Brazil lifted its forecast for its corn production to an all-time high, as it hiked expectations for the safrinha crop, sowings of which are being encouraged by prices setting seasonal records.

 

Conab, the official Brazilian crop bureau, raised by 1.78m tonnes to 100.46m tonnes its forecast for domestic crop output in 2019-20, taking the total narrowly above last season’s high of 100.05m tonnes.

 

The upgrade reflected a hike of 2.33m tonnes to 73.27m tonnes in the forecast for the safrinha crop which is currently being seeded, typically as a follow-on crop on land vacated by the soybean harvest.

 

That more than offset a downgrade to the production estimate for first crop corn, currently being harvested, but for which Conab noted that “climatic problems” in southern growing areas, “especially in Rio Grande do Sul, impaired” yield potential.

 

Price incentive

The upgrade to the safrinha corn estimate reflected “expectations of a significant increase in the second crop corn area” in Mato Grosso, the top growing state, where sowings had been encouraged by the crop’s “current profitability and favourable climatic conditions for cultivation”.

 

Safrinha plantings there were pegged at 5.31m hectares, up 438,000 hectares year on year.

 

Separately, Imea, the Mato Grosso research institute, reported that growers could obtain forward prices of R26.53 per 60 kilogramme sack for 2019-20 safrinha crop, up 28% on the equivalent price a year ago.

 

The farmer “has already been taking advantage of the opportunities of closing future contracts at prices above R$25.00 per sack, which is a record value for the period”, if below the spot price of nearly $35 per sack offered for corn for immediate delivery.

 

The historically high forward price – a reflection of the dent to supplies from a record 2019 export campaign - has encouraged Mato Grosso growers to fix already values for 64.4% of their expected harvest, a figure up 17.9 points year on year.

 

Southern setbacks

However, Conab highlighted too delays in sowings in other some states, a knock-on effect of a late-running soybean sowing season, which has confronted farmers with the prospect of a narrow window for safrinha corn plantings.

 

This dynamic “helps explain the estimated reduction in [safrinha corn] area in Mato Grosso do Sul and Paraná”, Conab said.

 

In Parana, the second-ranked safrinha corn growing state, plantings were 7% complete as of a week ago, compared with 38% as of the same stage of last season, data from state agriculture agency Deral show.

 

Separately, a report published overnight by the US Department of Agriculture’s Brasilia bureau noted “hurdles” to the Parana crop from the knock-on effect of “delays of up to 50 days” in soybean sowings.

 

“That has pushed the soy harvest later and is subsequently affecting the timeline for safrinha corn sowing,” the bureau said, noting that “the later [the] safrinha corn is planted in Parana, the larger the risk that the crop could be harmed by frosts as the southern hemisphere winter arrives.

 

“The earliest [planting] window closes around the third week of February in southern Mato Grosso do Sul and southern Parana.”

 

‘Complicating factor’

Despite its production upgrade, Conab left at 34.0m tonnes its forecast for Brazilian corn exports in 2019-20, on a February-to-January basis, well below last season’s total of 41.17m tonnes.

 

Even so, it was forecasting a drop in carryout stocks over this season, by 675,000 tonnes to an eight-year low of 8.44m tonnes, and “with a downward bias”, an inventory level that the bureau acknowledged could be a “complicating factor”.

 

The extent of the supply drain has forced Brazilian corn imports that Conab estimated for last season at 1.60m tonnes, an upgrade of 300,000 tonnes, with 1.0m tonnes expected for 2019-20.

 

The USDA bureau raised its forecast for imports this season to 1.50m tonnes “in response to the expectation of severely diminished stocks by the start of the market year.

 

“High prices throughout Brazil have led poultry and pork producers to go in search of cheap imports,” mostly from Paraguay, which “which shipped 620,000 tonnes of corn to Brazil between October and December, almost double the volume from the same period a year prior”.

 

Brazil’s own corn demand is on the rise, supported by expansion in the grain ethanol sector, besides growth in meat production, spurred by demand from Chinese importers seeking to fill the void in domestic protein output created by the African swine fever outbreak.

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