Brazilian corn harvest advances, but the exchange rate is a market concern

As the harvest of a record second-crop corn progresses, some new indicators are beginning to emerge. Brazil was not expected to enter the tariff war, but its geopolitical stance has fueled the emergence of a 50% tariff rate. There is no direct impact on the corn market, as Brazil does not export corn or its by-products to the United States; in fact, it imports ethanol. However, there are indirect impacts, the main one being the tragic effects on the economy, with consequences for the exchange rate. A weaker currency causes price movements or at least an attempt to correct domestic prices. At another time of the year, this short-term impact might have been greater. The harvest season at this time contains this environment of repercussions on domestic prices. However, we cannot ignore the economic situation going forward.

The Brazilian corn harvest is progressing. With Mato Grosso surpassing 50% this week, but now experiencing rapid growth, warehouses are quickly crowding up, and traditional open-air storage is back for another year. This is not only due to the high yields of this crop, but also because many warehouses still hold a significant volume of soybeans. The other states, such as Mato Grosso do Sul and Goiás, as well as those from Matopiba, are now progressing at a better pace, with corn losing moisture and sales continuing to advance. The Southeast region and Paraná, however, continue to experience slower or later harvests, which should progress from now on. Two weeks without rain should result in moisture loss and harvest progress.

Therefore, inevitably, supply is present and meets the necessary domestic demand, which has also begun to meet export demand. From August to January, exporters are present for business. Of course, due to prices on the Chicago Board of Trade, there has not been a very positive price curve for the coming few months. However, it is clear that business is occurring for future shipments, also because producers will need to free up warehouses by January for the new soybean crop. If these sales intentions do not guarantee this early commercialization and free up space, selling pressures may return at the end of the year.

The impact of tariffs on Brazilian beef will not change corn demand in any way. Just as Avian Flu did not affect corn demand, any change in second-round confinement will not affect domestic demand, especially because its share of the sector’s overall demand is modest. Thus, corn export flow is of paramount importance. This is the common denominator of domestic supply and prices.

We reached July with 9 mln tons committed to exports: shipped, currently shipping, or scheduled for shipment this week. July has reached 4.5 mln tons, surpassing July 2024. This is an important sign that exports are strong: low prices are not inhibiting overseas sales, and the recent rise in premiums could help boost exports for future months. It is important to evaluate three key factors for the corn market: the US climate over the next thirty days, the exchange rate in Brazil, due to the impact of the institutional crisis, and the potential economic sanctions against Russia. Aside from these indicators, the key issue remains the pace of exports.

Tags: harvest, corn, export, Brazil, shipments, Market, demand