China and Japan were the biggest buyers of Brazilian corn in 2023

Brazilian corn exports totaled 54.6 mln tons in 2023, a new Brazilian record. The interpretation of the reasons for this result establishes the best consideration for 2024, mainly for the sources of information that send signals to growers that we will have a shortage of corn in Brazil this year. In addition to being far from a similar situation, we will need to be very concerned about Brazil’s capacity to dispose of surpluses from 2024, currently estimated at 45 mln tons for exports. The erroneous interpretation of the external environment leads domestic market agents to make projections that do not match with this year’s reality.

The finalized data on Brazilian exports for 2023 confirm the huge purchases by China: 16.3 mln tons in the business year. Without a doubt, it can be said that this was the major variable in the flow of the record crop of 2023. Without this exceptional volume, Brazil would have even higher stocks today. It is important to reflect that China made purchases in 2022 of just over 2 mln tons after improving the health agreement with Brazil. Given the few global alternatives and the low US stocks, Brazil with its record crop was certainly the great alternative for China.

Japan also made good purchases of 5.4 mln tons. The reasons are the same, as Japan and China were permanent buyers of US corn. Availability, premiums, and easy access brought this good result to Brazil.

For Brazil, Mato Grosso, without a doubt, was the biggest beneficiary of this international demand. The state reaped a record crop last year and, according to Secex, exported 30.5 mln tons in the 2023 business year. Goiás (with 5 mln tons), Paraná (4.7 mln), and Mato Grosso do Sul (3.7 mln) were the other main exporters. Once again, Matopiba surprised with a very strong shipment of 7.7 mln tons, with Maranhão as the sales leader.

Exports are a variable derived from external factors combined with internal availability. In 2023, Brazil found this perfect combination for exports: United States with low stocks and prices on the CBOT above USD 5.00/bushel; Argentina without selling because of a historic crop failure; Ukraine with logistic difficulties due to the war; China in need for imports of nearly 23 mln tons; and Brazil with a record crop in the face of an unprecedented climate situation in 2023.

For 2024, these indicators will not be present, at least in the assessments that are currently possible. Ukraine, little by little, is finding space to export its production and is expected to reap a record wheat crop in April. Argentina is coming with a record corn crop, 56 mln tons, and it is clear that it will not have space to retain corn or soybeans internally. Pressure is already coming on corn exports. The United States has until August to export better volumes before overlapping with the 2024 harvest in September. China has already planned its production and made the imports it should to meet its internal demand for this business year. In other words, these factors drive the year to be very different from 2023 for Brazil.

This picture is already clear in this first semester. In 2023, Brazilian corn exports hit 5.5 mln tons between February and June. This year, it seems they will not reach 1.5 mln tons in the period. Export prices for the second crop closed last week at BRL 55/56 in Brazilian ports, not allowing more than BRL 30/32 for exports in Mato Grosso, for example. The domestic market, on the defensive, still pays better prices than exports for the first batches of the second crop. However, if the market pays better than exports, logically sales will not converge to the port. Without this, the possible exports of 45 mln tons in 2024 may not even be achieved.

The errors in evaluating the Brazilian market are enormous. Initially, by taking into account January exports, which still refer to the last business year. Later, by making projections of Brazilian exports for the year at levels similar to those of 2023. Finally, by exaggerating the cuts in the 2024 second crop. Brazil is not competitive at low prices, and it will be easier for the domestic market to inhibit large exports this year. On the other hand, Brazil cannot carry 20/30 mln tons in stocks, so, at some point, the domestic market will have to converge to the reality of the export price of BRL 55/56 a bag in ports.

What could inhibit this price curve for the second crop? A cut in the US acreage beyond 91 mln acres, a serious climate problem in the USA or China in the coming few months, a strong devaluation of the real, or even a very sharp loss of production from the 87 mln tons expected for the 2024 second crop. The internal market tries to create optimistic dynamics, based on very distorted information. The domestic market must become aware that without an export flow, there is no room for price improvements.

This reality, however, has not been shown in futures prices on B3 – the Brazilian Futures Exchange. The futures market is trying to support prices for the September contract with a spread of almost BRL 10/bag over the port. Banks and brokers do not seem to understand the seasonality of the Brazilian corn market, nor its price formation, as they maintain the levels of all expiration months aligned, without regional seasonal spreads. An important fact that a few have noticed is that the second crop is very advanced. Goiás and Mato Grosso, with many areas in excellent condition and expected to begin silking and pollinating in March. The harvest in these states must start in May. The 2024 second crop will be distributed more smoothly between May and September, however, domestic demand cannot absorb all of the second crop, thus we will inevitably have to move toward exports. And the B3 does not price in this situation at the moment, with the July and September contracts well above the port reality.

Tags: Brazil, United States, crop, stocks, Argentina, Japan, Ukraine, China, exports, corn