corn market analysis

Corn prices in Chicago also dropped in early September. The bushel of cereal, for the first month quoted, closed on Thursday (02) at US$ 5.16, against US$ 5.52 a week earlier. The August average ended up closing at US$5.52/bushel, losing 8.8% over July and registering its third consecutive monthly decline. In August 2020 the average was $3.25/bushel. In the US, crop conditions, on the eve of the cereal harvest, were 60% between good to excellent on August 29, another 26% were regular and 14% bad to very bad.

The return of rains in the US producing region, in large part thanks to hurricane Ida, was positive for most of the crops sown later in the US. As a result, corn prices dropped, following those of soybeans. And here in Brazil, prices have stabilized, showing a downward bias under the pressure of the off-season harvest, even if it comes with huge losses. The average in Rio Grande do Sul was R$90.28/bag, while in other national squares prices ranged between R$78.00 and R$94.00/bag, while the CIF Campinas (SP) was R$95, 00. On the B3, after four consecutive days of decline, corn prices started trading on Thursday (02/09) with slight increases. The maturity of September/21 was at R$90.76/bag, while November was at R$90.79, January/22 at R$93.00 and March at R$93.14/bag. The off-season producers are looking to quickly sell the harvested corn, aiming to make cash to pay expenses and take advantage of the high prices. This greater offer ends up pulling down cereal prices.

In fact, the harvest of corn second crop, in the Center-South region of Brazil, reached 89% of the total area until the 26/08, surpassing the level of the same period of the previous year. It is closed in Mato Grosso and São Paulo, and almost finished in Goiás. The most backward state is Paraná. The 2021/22 summer corn planting reached 5.3% of the expected area in the Center-South region of Brazil, against 8% in the same period last year. Rio Grande do Sul, thanks to the rains of the previous week, is the most advanced in this planting. (cf. AgRural) In this state, an area growth of 5% is expected for corn, although in the general Center-South the increase in area is projected at only 0.7%, increasing it to 4.38 million hectares . (cf. Safras & Mercado and Fecoagro) In general, there is still a lack of definition among producers, regarding production costs, when comparing corn to soybeans. In the south of the country, the fear of the incidence of leafhopper worries producers and leaves doubts about the area to be sown with corn. This pest has been causing a lot of damage to the cereal in recent times. Even so, the expectation is that the corn summer harvest will reach 25.5 million tons in 2021/22, against 21.6 million this past year. In normal weather, and already considering the future off-season 2021/22, projected at 84.8 million tons, a final production in the new production cycle of around 110.4 million tons is expected. (AgRural) This will mean an increase of 33% over the current frustrated crop, which should be slightly above 80 million tons. In turn, more optimistic analysts expect a total corn harvest in 2021/22 of around 122 million tons. (cf. Safras & Mercado).

Regarding the choice between sowing soybeans or corn, in most cases, at this time, in the South of the country, corn is the advantage. In Paraná, for example, at the beginning of September, “corn at around R$ 90.00/sack, for delivery between February and April 2022, generates a profitability of 9 thousand reais per hectare for the producer, while in the case of soy he earns 6,500 reais per hectare at the current price” (cf. AgRural). But it is a difficult decision, as in addition to pests, there is the fact that soybeans are more resistant to dry weather than corn.

Also in Paraná, according to Deral, the off-season harvest would have reached 82% of the area at this turn of the month, while the summer crop planting reached 3% of the expected area on 30/08. In Mato Grosso do Sul, the harvest reached 70% of the area, with the average productivity being maintained at 52.3 bags/hectare. Between the beginning of the off-season and the current moment, the volume to be produced in this state has already been reduced by more than 3 million tons. In turn, in Rio Grande do Sul, Fecoagro updated its corn production cost calculations. Current numbers, considering a normal harvest, indicate a 52% increase in the total cost this year, over the previous year. The total cost is now R$7,653.15/hectare. As a result, the Rio Grande do Sul cereal producer will have to produce 85.1 bags/hectare to pay the total cost, as long as the price remains at R$89.90/sack. At this price, the total cost of production would still be around 22% per hectare lower than that practiced in the previous harvest. However, if the price retreats, the situation changes proportionately for the worse.

In terms of the foreign market, according to Secex, Brazil increased its corn exports at the end of August, reaching a total of 4.3 million tons in the month. This total represents 119.3% above that exported in July, however, 30.6% below that exported in August 2020. In imports, including August, Brazil would have already purchased 1.23 million tons this year. Conab continues to estimate total imports at 2.3 million
tons for this year, while the private initiative reaches a volume of 4 million.

Finally, in September, public auctions for the purchase or removal of corn stocks carried out by Conab begin. The proposal is for the acquisition of up to 110,000 tons, which would be enough to meet the demand of the Over-the-Counter Program (ProVB) by the end of the year. The program benefits small animal breeders, including aquaculturists. Meanwhile, in Rio Grande do Sul, the Secretariat of Agriculture, Livestock and Rural Development (SEAPDR) issued a phytosanitary alert for the occurrence of corn leafhopper in local crops. The alert is based on a study developed by the Department of Agriculture and by Emater, under the coordination of the Ministry, which together monitored the affected corn crops. And also in the reports of recent occurrence of leafhopper in crops already in the early stages of this season, in the history of infestations from the previous season and in the forecast of little rain for the next period.