Brazilian market focuses on January and the corn crop arrival in the South

The Brazilian corn market has been “helped” by the combination of still firm external prices and a devalued currency. This scenario is keeping exports at a good pace, considering the characteristics of the year, and leaving this doubtful impression about the size of carryover stocks. Meanwhile, the market is experiencing its regional and seasonal peculiarities. Owing to the turn of the year, logistics are limiting business flow in the short term, some large consumers are already positioning themselves in terms of stocks during the period, and the feeling is that 2024 is over for commercialization. The arrival of the crop at some points in the south of Brazil, in mid-January, creates this environment where it will be possible to buy corn at perhaps lower prices in January and February and to stock up without many difficulties. As in all years of tight supply scenario, the domestic market seeks to act aggressively to contain expectations, that is, to not make it clear that corn supply is tight until the start of the 2025 second crop and that prices will not rise. Amid all this, the producer’s trading attitude will prevail in the semester, generating highs or lows according to the purchasing needs of the domestic market.

The domestic corn market enters this third week of December with the feeling that the 2024 business year is over. Of course, there are always specific regional demands that can bring movements amid the seasonal and extended end-of-year holiday, when logistics stops and availability is lower. The question now is whether trading will resume from January.

In January, we will still have some selling pressure due to the producer’s cash needs and warehouse vacancies, since the soybean crop is expected to be significant this year. In most of the country, there are still stocks held by producers, and naturally this volume may still reach the market before the soybean harvest. The issue is that when the general soybean harvest begins, in January, the market will feel the impact of the change in domestic logistics. Warehouses, freight traders, and cooperatives will be focusing on receiving soybeans, leaving no room for corn shipments or longer-distance flows. Buying corn will be a regional job and require short freight. In other words, the domestic market will change radically from February, with focus on nearby purchases.

At this point, January is still the last month in which this logistics will support these good corn deals for consumer regions, such as the Southeast, Midwest, and Northeast. Starting in February, local availability, at the crop arrival, and supply needs will influence price formation. And these regional characteristics will also bring regional price movements. In the South, for example, if the weather permits, the harvest will start in mid-January, in the west of Rio Grande do Sul and Santa Catarina. At first, offers would be above BRL 70 for this January harvest, but last week deals were already made at BRL 67/68. This decision by producers will impact the market.

The other regions of the South should only reap from February onward, already colliding with the soybean crop, the same occurring in São Paulo and Minas Gerais. The small summer crop from the Midwest region will be only available in April and in Matopiba, and only in May in Bahia. This means that the domestic market could experience several price bubbles with the regional arrival of the summer crop, which will depend on producer sales and consumer purchasing anxiety. Under normal weather conditions, there is no loss of production variable to generate another speculative point in the domestic market, although the summer crop is showing itself to be discreet, and good productivity does not compensate for the decline in planted area.

Exports continue to be an important factor in determining the carryover stocks of the business year. The business year (Feb/24 – Jan/25) exports now reach 35.6 mln tons. As January is just beginning to receive the first vessel appointments, we must understand that, despite the lower flow of purchases by traders, there are already defined commitments that will have to be met in January, with corn already purchased or not. Therefore, the closing of the business year may still have exports of 37/38 mln tons, leading to carryover stocks of 8 to 9 mln tons, depending on domestic demand.

Tags: exports, corn, Brazil, prices, Market, carryover stocks