Brazilian crop highlights the need for exports of corn

The updated report on the 23/24 crop and planting intentions for the 24/25 season released by Safras & Mercado brought fundamental information for the short term and 2025. Initially, an adjustment in the 2024 crop, particularly in Mato Grosso, due to the final planted area and higher average productivity. Then, the first real expectation regarding the effective planting of the next Brazilian summer crop, also with the exercise for the 2025 second crop. In the update to 125.5 mln tons of the current crop and 134.9 mln tons for 24/25, the main highlight is the need to export to dispose of surpluses. There is a distorted version of market traders suggesting a corn shortage in Brazil, while the market points to very low prices and exports without short-term strength. As with soybeans, this type of distortion harms the decisions of producers and consumers in the national market.

The harvest is entering the final line in Mato Grosso but is still under strong progress for the entire month of July and August in other areas. Therefore, we have not finished the harvest, which is not close to being finished either, but, of course, due to the characteristics of the year, it is faster than normal. This faster and earlier harvest without the necessary proportional speed in exports and in the internal flow of purchases begins to generate traditional open-air storage, which is not new for Mato Grosso, but is surprising in Goiás and Tocantins, for example. Yields in the states of Minas Gerais, São Paulo, Mato Grosso do Sul, and Paraná are confirmed to be lower, while they have a good average in Matopiba.

In this harvest we have detected excellent productivity in Mato Grosso, well above the normal average. With this, we increased the state’s production to 44.2 mln tons, slightly lower than the 2023 crop, but with cuts in planted area this year. The estimate for Goiás is practically unchanged, with slightly more damaged harvests in the east of the state, but with high yields in the southwest. Minas Gerais and São Paulo are beginning to speed up the harvest, the first crops suffered less from the drought, and the later crops are expected to see sharper yield cuts. Paraná maintained its profile with good harvests in the west and weaker yields in the north. Finally, Mato Grosso do Sul definitely has deep production cuts in the Center-South of the state, a situation that is reflected in the prices of this harvest.

In this way, a crop now revised to 85.9 mln tons, continuing to be well below 2023, and a national crop updated to 125.5 mln tons, still very comfortable to meet all domestic demand.

The Planting Intention, traditionally released by Safras & Mercado in July, pointed to another year of difficulties in increasing the summer corn planting. The 2.1% contraction in the summer area seems low but it reflects a planted area that is beginning to reach its downward limit. Some decisions are still being made by producers, and now the high in fertilizers could be another negative ingredient for summer corn. Production costs against market prices are too tight, that is, poor or unviable operating margins. There are difficulties in the seed industries due to low prices, hindering the adaptation to the corn reality. We will still have new updates for the planting of the summer crop, and it will be no surprise if there is a greater regional cut in the planted area, especially in the case of producers who decide later.

If La Nina does not bring us a more problematic situation for the summer crop, production could remain close to that of 2024. The 2025 season does not show reasons for cuts in area or investments, considering that 2024 was a very problematic year for corn, and we have satisfactory production with a still healthy planted area. In Matopiba, we must evaluate the possibility of some area recovery in 2025, not least because La Nina is a favorable climate point for the region.

In the general picture, a Brazilian crop with an area very close to that of 2024 and a potential production of 134.9 mln tons, still above 2024. Of course, in the 2024 season there were production losses due to drought, and while these variables do not affect the 2025 season, production expectations are positive.

From the point of view of the supply and demand picture, the situation is relatively comfortable for 2024. Even with the expansion of domestic demand, ethanol and the meat sector, we have exportable surpluses, and they are not discreet. With the update of the second crop last week, we will be able to have carryover stocks of nearly 10 mln tons if we manage to export around 40 mln tons. So, there cannot be a shortage of supply, at a time when we must direct this volume to exports in order to equalize the domestic supply. We may even have a natural retention by producers now during the harvest, which is normal, but internal demand alone will not be enough to provide liquidity to empty warehouses in November and December when the soybean crop approaches.

A market current tries to artificially impose, via information in the media or via shares on B3, a bullish post-harvest bias. Well, retention by producers may even generate some short-term impact on prices, but if the market remains above export parity, shipments will be weak between September and January, and the setback will end up impacting domestic prices. The issue is the loss of the export window, given the arrival of the US crop in September.

Brazil has difficulty being competitive at low prices due to its internal logistics. Some difficulties are arising in some ports in the north of the country due to the decline in river drafts in the Amazon region. We continue to warn that without an accelerated export flow, the domestic market will suffer from sales pressure further ahead.

Brazilian exports now reach 7.5 mln tons, with initial shipments expected in August. In 2023, August would already have nearly 4 mln tons scheduled, but in 2024 we only have 405 thousand tons so far. This does not mean we cannot have a big appointment closer to departure. However, this environment tells us that the flow starts at a weaker pace compared to 2023, when we ship 55 mln tons. Therefore, for domestic corn prices, this flow from now on will be fundamental. If a more significant flow develops after September and effectively gets closer to the target of 40 mln tons in the business year, we may see some internal movement in prices and interstate movements.

Tags: exports, harvest, corn, planting, Brazil, prices, Production, crop, yield