Brazil: Frosts have little impact on the second corn crop, but rain delays the harvest

The Brazilian second crop is being reaped at a slower-than-normal pace for this time of year. The moister weather of fall and the beginning of winter is holding back harvest conditions, however, everyone knows that at some point this late harvest will become an accumulated harvest. Last week’s frosts, as we pointed out, had little impact on crops, because the critical stage had already passed. Of course, some later regional crops may have been damaged by frosts and subsequent rains. Quality will be an important issue in warehouses in the affected regions. The particular issue is exports, which, surprisingly, are quite slow and stable for July, a fact that could further increase pressure for liquidity on the domestic market. The increase in the share of ethanol in gasoline to 30% was already planned and will greatly help sugarcane as well as new investments in corn ethanol for the coming few years. However, it will not affect the consumption of corn for ethanol in 2025.

The second-crop harvest is intensifying in Mato Grosso and Matopiba. The first harvests continue to meet contracts and short-term local demand. In Goiás, harvests should advance as of this week, as it rained last week. Minas Gerais and São Paulo are beginning with some sorghum harvests, but the main corn harvest should begin in mid-July.

Paraná, Paraguay, and Mato Grosso do Sul have been mostly affected by constant rains in June. The harvest is being extended, and some hybrids may experience a higher rate of burning due to moisture. Frosts have occurred extensively in much of western Paraná, Paraguay, and southern Mato Grosso do Sul, however, most crops are already ready for harvest, and the most that will happen to corn is a loss of quality. There is no loss of volume in this scenario. Southern São Paulo also experienced frosts, with occasional losses in very late crops.

Now, the question is the progress of the harvest and the liquidity of the 100 mln tons arriving on the market in the coming few weeks, along with another 10 to 12 mln in Matopiba. In this environment, the first harvests will undoubtedly find space in domestic demand. However, the domestic market will need a sequence of export flow if it does not want a difficult semester for domestic prices. Domestic demand is favorable, there is no problem, but alone it cannot absorb all this volume of supply.

So, we return to the main topic, that is, the flow of exports in this second semester. The June line-up shows weak shipments of only 650 thousand tons, with ships moving to July. July shows a schedule with 1.6 mln tons, compared to 3.6 mln in July 2024. It is still entirely possible to reach last year’s number in July, however, some ports need to show a better shipment configuration, such as São Luís, Santos, and Paranaguá. Plenty of soybeans and sugar are still being shipped, limiting the space for corn. São Francisco (SC) and Santarém (PA) continue with a better initial pace. Barcarena (PA) still has structural problems and should have difficulties with corn in the second half of the year.

Therefore, with July having a low pace, the implications are greater selling pressures in July and August in the domestic market, as well as a greater concentration of shipments in the months of August and January, necessary for the flow of the second crop. The most complicated issue for domestic prices is price formation, that is, port levels. With prices on the CBOT falling, reaching USD 4.00/bushel last week, and the dollar below BRL 5.50, prices at ports were between BRL 63 and 66 a bag for shipments in the second half of the year, with little liquidity for business in July.

Premiums are well-positioned, that is, with the calm global supply there is little room for high premiums, in order to compensate for the low CBOT futures and exchange rate. Therefore, the market needs to wait for liquidity in future months, carry domestic stocks until exports begin to offer more intense domestic liquidity, and domestic demand is able to compete more with exporters. The approval of the addition of ethanol to gasoline from 27.5% to 30% will not change this year’s corn demand. This is because demand is already scheduled for the maximum crushing capacity of the industries already installed. In other words, to increase corn consumption in this segment we will need new industries and capacity growth, which will support the new projects being approved for 2026 to 2030. In the short term, this will greatly benefit sugarcane, which can reduce sugar production and convert it to ethanol in a practical way. Therefore, it will not be this demand item that will compromise more corn supply in Brazil, at least this year.

Tags: corn, export, Brazil, shipments, Market, second crop, harvest