Lower supply in BR boosts prices to record levels in 2021


Cepea, January 3, 2022 – Corn prices hit record levels in the Brazilian market along 2021. The boost came from both the low stocks from the 2019/20 season and, largely, concerns about the effects of the weather on sowing and development of the crops from 2020/21. In global terms, the world output was lower.


In the first crop, productivity was constrained by the drought during crops development, majorly in southern Brazil. According to data from Conab, the area allocated to the first crop (2020/21) was 2.6% larger, while productivity was 6.2% lower, resulting in an output of 24.7 million tons, 3.8% lower than that in the previous season. This scenario added to lower ending stocks pushed up corn prices in January and in February.


Still in the first quarter of the year, a large area with the second crop of corn was sown out of the ideal period. This delay and the severe drought raised perspectives for lower supply in the second semester, keeping prices on the rise in Brazil until May, when the monthly average hit BRL 100.72/60-kilo bag, a nominal record in the series of Cepea. On the other hand, in June, the nearness of the harvesting pressed down values.


On the average of the first semester (Dec. 30, 2020 – June 30, 2021), the ESALQ/BM&FBovespa Index for corn (Campinas, SP) rose by 14%. The average in the first half of the year closed at BRL 91.71/60-kilo bag, 76.8% down from that in the same period of 2020, in nominal terms.


At the beginning of the second semester, frosts in central southern Brazil, mainly in Paraná and Mato Grosso do Sul, compromised the productivity of second crops even more – these crops had already been damaged by the drought and hampered by sowing delay. Aware of this scenario, sellers left the national spot market, despite the peak of harvest, and corn prices resumed rising in July and in August.


Indeed, the weather hampered the development of the second crop of corn, which totaled 60.74 million tons, 19% less than that in the previous season. According to Conab, the area allocated to corn crops grew by 9%, while productivity decreased by 26%. For the third crop, the output totaled 1.56 million tons, 15% down from that in 2019/20.


Considering the three crops altogether, the Brazilian corn output totaled 87.05 million tons, 15% down from that in 2019/20. The output added to the initial inventories (10.6 million tons) and imports (forecast at 2.3 million tons) result in an availability estimated at 100.35 million tons in the 2020/21 season. Domestic consumption closed at 72.33 million tons, leading to an exportable surplus of 28 million tons, the lowest since the 2015/16 season (data are from Conab).


The second crop failure added to high prices in Brazil led sellers to prioritize domestic consumption rather than exports. In the 2020/21 season (February – November), Brazilian corn exports totaled 14.72 million tons, 48% down from that shipped in the same period of the previous season, according to data from Secex.


On the other hand, between September and November, corn prices faded influenced by the disinterest of purchasers, the progress of the second crop harvesting, lower exports and sowing of the summer crop (2021/22) amid favorable conditions. However, in December, low availability and the dry weather drove agents away from the national spot market, which resumed underpinning prices in Brazil.


On the average of the second semester of 2021 (until Dec. 22), the ESALQ/BM&FBovespa Index dropped by 1%, averaging BRL 92.03/bag, still 0.36% higher than the average in the semester before and 40.8% up from that between July and December of 2020, in nominal terms.


In 2021 (until Dec. 22), the corn Index rose by a staggering 12.8%, closing at BRL 88.69/bag on Dec. 22. On the average of the regions surveyed by Cepea, values increased by a staggering 21.7% in the over-the-counter market and by 17.1% in the wholesale market.


If Conab’s estimates are confirmed, Brazil may export 19.2 million tons of corn between Feb/21 and Jan/22 (2020/21 season). Ending stocks may total 8.8 million tons by Jan/22, 25.3% below the average of the three last seasons and the lowest since the 2016/17 crop. Thus, by the end of the 2020/21 season, corn availability in Brazil is expected to be lower than that in the previous crops.







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