Brazil’s corn sector emerges as future challenger to US

Brazil has steadily planted corn in recent years, and production could be on the verge of a boom as farmers double or even triple crops to take advantage of high prices, demand from China and a growing domestic ethanol sector.

Long a soybean powerhouse, Brazil may not yet be within striking distance of surpassing the U.S. in corn production and exports, but the emerging competition is attracting increasing attention from U.S. producers.

“Brazil has incredible agricultural production capacity,” said Colin Watters, director of exports and logistics for the Illinois Corn Marketing Board and the Illinois Corn Growers Association. “We will have to pay attention to it. It’s something that’s definitely on our radar.”

Brazil is still in the final stages of planting the first of three corn crops this calendar year and won’t start planting its biggest corn crop for the 2022-23 marketing year — the second crop, or “safrinha” — until January. Brazil’s National Supply Co., called by its Portuguese acronym CONAB, has the highest estimate for all plantings for 2022-2023 at 55 million acres. That’s up 4% from 2021, and total production is expected to reach about 5 billion bushels — a 10% increase.

The growth is even more impressive in context. Brazilian farmers produced about 3.2 billion bushels of corn a decade ago in the 2013-14 marketing year, meaning the country has increased production by 63% over the past 10 years.

According to Gary Schnittka, a professor and agricultural economist at the University of Illinois, and Joanna Kalusi, a visiting researcher at the university, this is a dramatic increase and will continue.

New agricultural land is constantly being brought into production through both pasture conversion and farm expansion in the north and northeast of Brazil—commonly known as the Matapiba region.

The success of safrina has increased along with soybean production in Brazil, and there is still plenty of room for growth as market conditions push more and more soybean farmers to double their crops, Colusi said.

“The growth of the safrinha crop is an opportunity for Brazil to double its corn production in the coming years,” she said in the webinar. “More than half of corn production is in the Midwest.”

One need only look to Mato Grosso, Brazil’s largest agricultural state, to get an idea of ​​the potential for corn expansion in the Midwest. According to the Mato Grosso Agricultural Economics Institute, farmers planted about 29 million acres of soybeans last year, but about 18 million of those acres received a second crop of corn. That’s about 11 million acres of potential double-cropped corn-soybean acres in one state.

“We’ve seen grain production grow in Brazil, and there’s really no reason not to expect it to grow at roughly the same rate in the future,” Schnitky said.

“This number gives you a sense of the expansion opportunities when you look at grain production,” he said.

And more corn means more exports.

CONAB estimates that Brazil will export 46 million metric tons of corn in the 2022-23 marketing year. While this is still well below the USDA’s forecast for US corn exports (58 million tons), Brazil’s numbers are rising rapidly due to high corn prices and a weak currency (the Brazilian real is around 5, 2 to 1 US dollar).

“The U.S. dollar is incredibly strong right now,” Watters said, “and that makes U.S. exports not as competitive, just ebb and flow.”

At the moment, there is plenty of room in the world market for more corn and room for Brazil to expand its global sales without affecting U.S. exports, but that may not last much longer as Brazil shows no signs of slowing down and the country secures new access to the largest importing country in the world — China.

CONAB’s new forecast for Brazil’s corn exports is up 24% from 2021-2022, and is likely to include shipments to China for the first time.

“There is an expectation that exports will grow even more thanks to the agreement signed by China and Brazil last May,” Kalusi said. “The two countries agreed on a protocol … China is taking steps to speed up imports of Brazilian corn, so shipments from Brazil could still happen this year.”

Although the protocol has been signed, Brazil’s corn exports to China are unlikely to increase significantly in the near term, said Glauber Silveira da Silva, executive director of the Brazilian Association of Corn Growers, known as Abramillo.

“Exporters register with the Ministry of Agriculture and undergo inspections,” he said Agro-Pulse. “After that, the list of interested parties will be sent for approval by the Chinese authorities and only then will the exports begin.”

Not all of the increase in Brazil’s corn production is for export, Colusi said. Some are flocking to the country’s growing corn-based ethanol sector.

“Brazil is expanding ethanol production,” she said. “There are currently 17 corn ethanol plants operating in the country, 15 of which are located in the Midwest,” Colusi said.

Brazil, historically known for ethanol from sugar cane, is expected to produce 4.5 billion liters (about 1.18 billion gallons) of corn-based ethanol this year, up 30% from last year, Abramilho’s da Silva said.

But he also said the expansion is slowing. Brazilian ethanol companies have “backed off their projects due to the instability of government policies,” he said. “Two new power plants are suspended. Ethanol is currently facing major challenges due to biomass shortages, consistent government policies, and high corn prices. These factors should slow expected growth unless it reverses soon.”

Tags: corn, Brazil, USA