Naperville, Illinois, Jan 29 (Reuters) - Facing a possible decrease in global corn supplies, Brazil’s upcoming corn harvest is crucial to avoid complications.
Brazil's corn reserves are notably scarce as the country heads into the 2024-25 season, with the planting of the second corn crop, responsible for nearly 80% of the nation’s corn output, starting slowly.
Projections hint at a slight improvement in Brazil's second corn production compared to the previous year. However, a shortfall could potentially open up opportunities for the United States.
In Mato Grosso, the top corn-producing state, only 1% of the second crop has been planted, marking the slowest progress since 2011, similar to the pace in 2021. Historically, years with such slow starts corresponded to low corn yields.
Delayed soybean harvesting due to untimely rains in Mato Grosso is also impeding corn planting. This situation could lead to corn yield formation coinciding with the onset of the dry season.
In a typical week, farmers in Mato Grosso would plant around 11% of their corn. Hence, to maintain a reasonable pace, planting completion should reach at least 12% by the end of the week. Although recent days have been dry, rains may return in the upcoming period.
As of this week, Parana, Brazil's second-largest corn producer, has planted 9% of its second corn crop, a typical progress rate. Delayed planting in this southern state exposes crops to frost damage later in the season, a risk observed four years ago.
Both Mato Grosso and Parana collectively contribute two-thirds of Brazil’s second corn yield.
Brazil's adjacent corn exporter, Argentina, anticipates the effects of La Nina, a cooling phase in the Pacific Ocean. The impact of La Nina differs between Brazil's corn production and Argentina's crops, with Brazil's optimal outcomes typically not aligning with severe La Ninas.
Brazil's second-largest southern state, Rio Grande do Sul, faces effects similar to Argentina due to La Nina, although it does not cultivate second corn.
Despite Brazil harvesting its second-largest corn crop in 2024, exports to date have decreased by approximately 29%. With reduced shipments to China, Brazilian corn inventory remains tight, given robust domestic demand.
USDA data indicates Brazilian corn stocks-to-use ratio at 2.1%, a 42-year low, reflecting a significant drop compared to the previous year's 7.1%.
Conab, Brazil's agricultural agency, estimates stocks-to-use at 2.8% for 2024-25, which, while higher than the previous year, remains well below the levels of 2020-21.
In contrast, the USDA predicts the U.S. corn stocks-to-use ratio at 10.2% for 2024-25, whereas the lowest figure in recent years was 7.4% in 2012-13.
This delicate balance in Brazil's corn production leaves minimal margin for error, as any shortfall could impact global export share, potentially benefiting U.S. corn exporters, who have recently experienced strong sales.
With the United States and Brazil jointly representing about 57% of global corn exports, both countries are concerned about the loss of Chinese business. However, if China reengages in Brazilian corn imports, it could redirect other Brazilian customers to U.S. supplies later in the year, particularly if the U.S. corn crop rebounds as anticipated.
Karen Braun, a market analyst for Reuters, provides the insights above.