Low domestic supply keeps prices on the rise in Brazil

Cepea, August 3, 2021 – Corn prices increased in the Brazilian market in July, reflecting the lower volume made available by sellers, who are focused on both the harvesting of the second crop and the productivity decrease, due to the effects of the drought and frosts on crops. In general, sales were slow, and demand, sporadic, because of the high price levels.

 

In Campinas (SP), a typical consuming region in Brazil and the base for the ESALQ/BM&FBovespa Index for corn, prices rose by 13.2% in July, closing at 101.40 BRL (19.51 USD)/60-kilo bag on July 30.

 

CROPS – Agents are focused on the decrease in the productivity of the second crop, caused by the cold. In Paraná, a survey from Seab/Deral released in the last week of July pointed to a decrease of 58% in the output compared to that first expected (of 14.6 million tons), now estimated at 6.1 million tons, half of the volume produced in Paraná in the 2019/20 season. According to Seab/Deral, this reduction is the steepest in all times, which may limit exports and increase imports in the state. The harvesting of the second crop had reached 7% of the state area until July 26.

 

In Mato Grosso, until July 23, the harvesting had reached 72.79% of the total estimated, according to Imea (Institute of Agricultural Economics from Mato Grosso), which also indicates a decrease in productivity, from 106.29 bags/hectare in January to 93.8 bags/hectare in July. This decrease may result in an output of 32 million tons, 4 million tons down from that initially expected and almost 3 million tons lower than that in the previous year.

 

With the reports showing that the Brazilian corn output may decrease steeply, some consumers increased purchases from other countries in the Mercosur. According to data from Secex, in the first 17 working days of July, Brazil imported 136.84 thousand tons of corn, 200% more than all the volume imported in July last year – most of the corn imported last month came from Argentina and Paraguay. Between January and June, almost all the corn imported came from Paraguay, followed by Argentina and the United States.

 

On the other hand, deals for exports were halted, since prices at ports have been much lower than that in the domestic market. However, shipments of the product previously purchased are supposed to step up as the harvesting advances. So far, Conab (Brazil’s National Company for Food Supply) indicates that Brazil may export 29.5 million tons of corn, but this volume may be revised, since the crop failure in Brazil and the higher prices in the domestic market may lead exporters to allocate batches to the spot, according to agents consulted by Cepea. In the first 17 working days of July, Brazil exported 1.12 million tons of corn, according to Secex.

 

(Cepea-Brazil)

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