Viewpoint: Brazil to further increase corn exports

Brazil is expected to harvest a record corn crop in 2022-23, which usually depresses prices, but the expectation of firm demand on international markets points to sustained port differentials.

The outlook is optimistic for corn exports in Brazil, which are expected to hit a record high in 2022, reaching almost 43mn metric tonnes (t), according to the national association of grain exporters (Anec). The volume would be more than double the 20.6mn t shipped in 2021, when unfavorable weather conditions hurt corn yields. National supply company Conab projects the total 2022-23 corn crop at 125.8mn t, well above the 113.1mn t estimated for the 2021-22 crop, mainly because of an expected increase in planted area to 22.3mn hectares (ha) from 21.6mn ha. Market participants estimate that Brazilian corn exports will reach 44mn-46mn t in 2023.

Ukraine’s absence from the global corn market in the first months of the year, after the beginning of the conflict with Russia in February, lifted demand for Brazilian corn, as countries that usually relied on the eastern European nation had to look for alternative suppliers of corn. In March, export opportunities arose for Brazil’s summer crop for shipments in April-May, which is atypical, as most output comes from the winter crop, harvested in July.

A drop in corn production in other European countries because of adverse weather also increased Brazilian corn exports. Later in the year, Central American countries and Mexico began to buy Brazilian corn when navigation on the Mississippi river was interrupted by drought conditions, making it difficult to export US grains.

Exports to China will shake up Brazil’s corn market in 2023.

The Asian country signed a sanitary agreement with Brazil to import the grain. It deals with requirements that aim to keep quarantine pests out of the country.

Trading companies consider the rules to be very strict, as they demand full corn traceability. The agreement originally foresaw exports to begin in the 2022-23 harvest, but in August both countries agreed that only warehouses and port terminals would be inspected, which made it possible to export corn harvested in the 2021-22 season. Shipments began in late November.

Brazil shipped 68,000t of corn to China in November, according to data from the Brazilian government. Market participants estimatethat the South American country will export 1.5mn t of corn to the Asian country in December-January and 3mn-5mn t in 2023.

Development of the China market should help keep premiums stable in Brazil in the first quarter. Market participants say that corn prices in Chicago may increase slightly, but premiums in Brazil may fall in the second quarter if the record harvest is confirmed.

Despite record corn exports in Brazil, there was less liquidity and few deals reported in the Santos/Tubarao cargo market, one of the most important corn routes in the country. Most deals were closed in the cnf market and in the so-called in house model, that is, between companies that operate in Brazil and have offices in the buying countries.

The cargo market was volatile in 2022. Premiums closed at 150¢/bu over the CBOT in May and dropped sharply in June and September.

Exports from the Northern Arc ports, which offer better logistics to serve Central America and Europe, also grew in 2022, which helped reduce liquidity in the Santos/Tubarao cargo market. The southeastern and southern ports are also more competitive to export corn to Asian countries. Japan was the second largest buyer of Brazilian corn, only trailing Iran.

Tags: demand, international markets, Ukraine, record corn crop, China, exports, harvest, corn, Brazil, prices, Outlook, Market