17 million mt of Brazilian corn going for ethanol

Ethanol will create new prospects for Brazilian corn in the domestic market, with corn for ethanol use rising sharply to 17 million mt in the next marketing year, Arthur Neto, partner director at Alphamar Shipping Agency, told S&P Global Commodity Insights June 12.

Pointing to the impact on domestic and export markets, Neto said on the sidelines of the IGC Grains Conference in London that increased use of ethanol for corn will push prices up, incentivizing corn production in a situation where “the market is flooded by corn because you don’t have much exit for it in the domestic market.”

“This is going to be a dynamic that’s going to make the price on the domestic market go higher, which makes the producers maintain the corn inside, meaning that if you have export demand, you need to pay much more,” Neto said of the expectation of 17 million mt of corn for ethanol usage in marketing year 2024-25. For 2023, the figure was 13.26 million mt.

Speaking on whether Brazilian corn is trading higher than competitors’ in the current season, Neto said, “you have to understand that the market is very heated internally, so it doesn’t make sense for the farmer to just sell it at pennies for the international market.”

“I do believe that there’s going to be a lot of market, but not as much as in the previous year, because the market is good for the farmer domestically, and they will hold on to the cargo in the country, even though there are many incentives to export,” Neto added.

‘We are here to sell’

Responding to speculation around China’s move to bridge the gap between its domestic supply and consumption and what it means for its biggest supplier, Brazil, Neto said carrying out that plan would take time.

“China is growing, not as much as it was, but there’s a lot coming out of there,” Neto said.

Any change in China’s domestic supply and demand equation will have a major impact on the global balance sheet, considering China’s position as the biggest demand center for corn.

“I wish them the best of luck,” Neto said. “I hope they make it and reach their goals. Meanwhile, we are here to sell.”

Big flooding impact on soybeans, less on rice

Speaking about flooding in Rio Grande do Sul, a key agricultural province that was expected to produce 70% of the country’s rice and about 15% of its soybeans in the current marketing year, Neto said the floods were less likely to have a major impact on rice, but soybean production could take a hit.

“Roughly 85% of the rice was already harvested when we had the floods,” Neto said. “Now we just have logistics issues. Some delays are expected, but not much.”

However, he said he thought the floods would leave their mark on soybean production, a big factor considering Rio Grande do Sul’s strategic location closer to major ports.

“Soybeans were the core produce in the region, shipped to the port close to it,” Neto said. “That system itself is going to lose a lot of volume.”

Neto further pointed to the floods in Rio Grande do Sul causing a terminal outage, which is posing a “big risk to the entire export ecosystem.”

Lower water levels a concern for shipping

Brazil’s northern ports saw some of the lowest water levels on record last year because of a severe Amazon drought, forcing cargoes to be diverted to Santos. The Alphamar director compared challenges in the northern ports to those on the Mississippi River in the US in the previous year.

“When we talk about the northern ports, we’re not talking about any problems with the capability on the ports,” Neto said. “The water levels are OK. The problem is the cargo being transferred.”

He added that at some point, the water level will be so low that convoys will have to be disassembled to pass over shallow areas.

“Sometimes a trip that is to be done in two days can take around five, so of course, with the total turnaround of the barges, it’s very bad,” Neto said, adding that there could be two months of major shipping challenges.

Tags: corn, Brazil, ethanol