Viewpoint: Brazil 2020-21 corn outlook uncertain

Brazil's 2020-21 grains and oilseeds season has been marked by uncertainties because of unfavorable weather during planting, a scenario that is unlikely to improve as planters gets ready to sow the winter corn crop (safrinha) in early 2021.

Across the country it is expected that part of the safrinha will not be planted within the ideal window — which runs from January through mid-March — because of a delay in soybean sowing back in September-October amid poor rainfall.

In Brazil most of the winter corn is sowed during the first quarter in the same fields previously occupied by soybeans. It is the main crop of the cereal, accounting for nearly three-quarters of the total, and is harvested from May-June. But if planted outside of the ideal window, it becomes susceptible to yield losses from climatic risks, such as drought and frosts, which are both common during Brazil's autumn.

In Mato Grosso, Brazil's top producer of soybeans and corn, farmers have adopted a cautious position, avoiding committing their future safrinha harvest, brokers said. More than 60pc of the expected 2020-21 Mato Grosso winter corn output has already been traded, a record level in advance. Farmers are focused now on planting instead of committing more of their future harvest, while market participants calculate how much of the season will miss the ideal window.

A similar situation is seen in Parana, Brazil's second-largest producer of soybeans and corn. The state's Department of Rural Economics (Deral-PR) recently said that a delay in safrinha planting is expected to occur in the west portion of Parana, where farmers had more difficulties to cultivate soybeans in prior months.

But despite all the risks, farmers are expected to keep their prior targets for acreage for the winter crop. The main reason: High prices that might make up for crop losses. Bids in Mato Grosso for delivery in July next year, during the safrinha harvest, are above R40 per 60kg-bag, compared to R30/bag in the same month in 2020. The higher values reflect the weaker Brazilian real against the US dollar, futures' increases on the Chicago Board of Trade (CBOT) and uncertainty over the crop itself.

For now, Brazil's agricultural statistics agency Conab pegs the 2020-21 safrinha output at a 76.8mn t record, from 75mn t in 2019-20, with acreage of more than 13mn ha. Total production — adding summer corn — is seen at 102.6mn t.

Domestic corn prices are expected to remain high through the beginning of the safrinha harvest amid strong domestic demand, mainly from animal feed producers and corn-based ethanol plants. Beyond that, the summer corn crop has been facing losses because of drought, especially in the southern state of Rio Grande do Sul, where production is said to be almost 2mn t below expectations.

As a result, Conab increased its forecast for Brazil's corn imports in 2019-20 to 1.1mn t, from 900,000t seen in November, as the market attempts to improve local inventories for the beginning of the new year.

At the moment there are no expectations of a corn shortage in the Brazilian market in 2020-21, despite the attractiveness of exports because of the weaker real. Conab estimates Brazil will export 35mn t of corn next cycle, up slightly from 34.5mn t in 2019-20. Domestic consumption is expected increase by 4.6pc to 71.8mn t, with 2020-21 ending stocks declining to 7.4mn t, compared to 10.6mn t by the end of the prior season.

By José Roberto Gomes

2021-04-02 20:16