Brazilian market slows down with lower prices of corn at ports

The domestic market has gained support space with the strong devaluation of the Brazilian currency and the unbridled attitude of traders in buying corn to meet short-term demand for shipments at national ports. An initial movement with the climate in the United States together with a very strong exchange rate in Brazil consolidated a support situation at the turn of the month. The completely opposite version of this scenario weighed on expectations last week. The dollar returned to BRL 5.50 and the CBOT lost the level of USD 4.00/bushel. There are limits to raising premiums above what they already are, so the result is a resumption of losses at ports. With the price of Brazilian corn more expensive than its competitors, global demand may be induced to buy US corn and reduce interest in Brazilian corn.

Retention of more than 80 mln tons in the belief that domestic prices will rise above the international environment? This seems to be the Brazilian domestic market’s attempt in this final phase of the 2024 second-crop harvest. Producers are reaping, selling what is necessary, and retaining most of the current second crop. There have been some sales movements for longer withdrawals, October and November, but the indicated prices have not yet reconciled the interests of producers with those of buyers.

Of course, we already have a good percentage of the second crop traded, updated by Safras & Mercado in our latest issue. However, a percentage of traded corn indicates that buyers are also positioning themselves for the future, whether for the domestic market or exports. The issue is that this retention movement is pushing the stocks held by producers to be traded later on. Exports are increasing their volumes, but we would need to break the 40-mln-ton barrier for the year to indicate any supply deficiency by the end of 2024. The risk of excessive retention is the loss of the ideal window for corn exports, competition with competitive US corn, and the need to empty warehouses at the end of the year for the arrival of the soybean crop. Therefore, the rise in corn prices in the Brazilian domestic market can only be consistent and sustainable from now on through good exports.

Exports closed July with effective shipments of nearly 5 mln tons, well above the 3.5 mln tons registered by Secex. This difference will be reflected in official data in the coming few months. August now has 6 mln tons committed, with 1.4 mln tons already shipped this month. In total, we have 13.5 mln tons accumulated this year, shipped, and scheduled for shipment. To achieve a target of 40 mln tons this year, Brazil will need a monthly average of 5.3 mln tons between September and January. Let us remember that weaker exports will result in a greater supply available in the domestic market, while excess exports could lead to adjustments in final stocks.

There is a regional situation that sustains certain price levels. In the south of Brazil, for example, the difficulties in pricing offers from Paraguay, losses in Mato Grosso do Sul, and low price appraisal by growers in Paraná are keeping prices still strong in comparison to exports and maintaining some supply difficulties in consumption regions. However, these more supported prices also inhibit exports. For August, there is one ship scheduled for Paranaguá and none for São Francisco (SC). The deduction then is that the entire second crop, albeit smaller in such locations, is still in states to meet domestic demand.

In the Southeast region, the harvest is still taking place. Very little corn is being bound for exports, since regional prices are also above port levels. There is plenty of retention by producers, whether in warehouses or in silo bags. Could the decline in soybean prices be a variable that would lead producers to resume selling corn in the coming few weeks? It is possible, especially since August 30 and September 30 are debt maturity dates, and the option may be to sell more corn and sorghum in these regions.

In the Midwest, August was quite healthy for good sales, close to what was happening with prices in July. Last week saw a good volume of business between BRL 40 and BRL 46 a bag, depending on the region of Mato Grosso, for shipments from September through November. In Goiás, a good sales pace occurred at around BRL 50 for shipments in September. At the end of the week, with falling prices abroad and appreciation of the real, offers remained at BRL 50, but there were some deals at BRL 46/47 for withdrawals and payments in August and September. Some local cooperatives still maintained prices that did not fit the export parity at the end of the week.

In Matopiba, there was also good business last week with exports in Maranhão, Piauí, and Tocantins, with averages close to BRL 50 for shorter shipments. However, with the decline in prices at ports, the week closed with indications well below those levels.

In general, the Brazilian market is trying to impose itself internally to price corn above port levels. Brazilian corn is now USD 25/ton above U.S. corn prices but it is still facing some specific demands, such as from Iran. The strike that will begin in Argentina this week does not affect corn shipments, only the soy complex, as it is a strike by workers in the oilseed industries.

Tags: corn, Brazil, prices, crop, shipments, Market, ports