Brazil’s slow corn planting may further squeeze tight world stocks -Braun

(The opinions expressed here are those of the author, a market analyst for Reuters)

NAPERVILLE, Illinois, Jan 29 (Reuters) – With global corn supplies set for decade lows later this year, Brazil’s corn harvest cannot afford a mishap.

Brazilian corn stocks are particularly tight heading into 2024-25, and planting of the second corn crop, which accounts for almost 80% of the country’s corn production, is off to a slow start.

Brazil’s second corn output is predicted to rise modestly this year versus last, though if that fails, it could spell opportunity for the United States.

Second corn in top growing state Mato Grosso was just 1% planted as of last Friday, the date’s slowest pace since 2011 but nearly identical to 2021. Both of those years plus 2016, another slow year, coincided with some of the state’s poorest corn yields.

Untimely rains have delayed Mato Grosso’s soybean harvest, which also delays corn planting. This shifts the corn yield formation window to potentially overlap with the onset of dry season.

Farmers in Mato Grosso, on average, plant about 11% of their corn crop this week, so planting efforts should be at least 12% complete by Friday to maintain a somewhat comfortable pace. The last week has been favorably drier, though rains could resume over the next several days.

Brazil’s No. 2 corn grower Parana has planted 9% of its second corn as of this week, a relatively normal pace. Late corn planting in the southern state presents frost damage risks late in the season, which were prominent four years ago.

Brazil has just as much to lose when things go wrong in Parana versus Mato Grosso, since yields tend to fluctuate more in Parana. That state’s 2020-21 second corn yield fell 50% below the long-term trend, while Mato Grosso’s 2015-16 result was about one-third below.

The two states account for two-thirds of Brazil’s second corn harvest.

Southern neighbor and fellow exporter Argentina is battling dryness this season due to La Nina, the cool phase of the equatorial Pacific Ocean. Brazil’s second corn yields do not correlate as well with La Nina or El Nino as do Argentina’s crops, but Brazil’s best outcomes typically do not coincide with stronger La Ninas.

La Nina affects Brazil’s southernmost state of Rio Grande do Sul in a similar way as it does for Argentina, but the state does not raise second corn.

In mid-2024, Brazil harvested its second-largest second corn crop, some 12% smaller than in the prior record year. However, Brazilian corn exports since July are down around 29% on the year.

Shipments to China, which was the destination for 29% of Brazilian corn cargoes in calendar year 2023, are down more than 90% on the year for the July–January period.

The lighter shipments have not loosened Brazilian corn inventory since domestic consumption has been strong. The U.S. Department of Agriculture pegs 2024-25 Brazilian corn stocks-to-use at 2.1%, a 42-year low and down from 7.1% in the prior year.

USDA’s Brazilian counterpart Conab has a slightly different take as 2.8% stocks-to-use in 2024-25 would be up from 2.1% in the prior year but well below the near-15% levels of 2020-21.

For comparison, USDA predicts 2024-25 U.S. corn stocks-to-use at 10.2%. The lowest reading so far this century was 7.4% in 2012-13.

This suggests Brazil’s corn crop has little room for error, and any shortfall could result in a loss of global export share. This may help extend the winning streak for U.S. corn exporters, who have enjoyed above-average sales in recent months.

Together, the United States and Brazil account for about 57% of global corn exports.

Both suppliers are lamenting the loss of Chinese business, which could theoretically resurface at any time. If China pops back into the Brazilian corn market, that could feel like a loss for the United States.

But with thin Brazilian stocks, Chinese purchases could indirectly push other Brazilian customers to U.S. supplies, especially later this year if the U.S. corn crop rebounds as expected. Karen Braun is a market analyst for Reuters. Views expressed above are her own.