Second crop of corn already shows losses and now focuses on the risk of frost

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            The question at this point to be evaluated internally is what will weigh more on the formation of domestic prices: climate conditions still present in the 2020 second crop or possible cuts in domestic demand due to COVID-19? Amid all this, there are exports. At this moment of tension due to internal liquidity, exports become the alternative to sell the second crop. While brokers and some consultancy companies keep insisting on the theory that domestic demand will have a strong decline, producers may start to drive more corn to trading companies and speed up Brazilian exports. The risk? Again, excess exports in this second semester and a 2021 to which it is hard to envision a recovered summer corn crop, given the extremely high price of soybeans and the theory of the retraction of domestic corn consumption.

Soybean prices exceeded BRL 100/bag in some places closer to ports in Brazil for 2020 and stood between BRL 90/100 for 2021. Can we believe that producers will stop selling and planting soybeans next summer to plant corn at most at BRL 40? It does not seem economically logical to us not to plant soybeans at these price levels for the 2020/21 season, to the detriment of several summer crops, from cotton to corn.

This is a very important context to define what has been done thus far. Brokers in some international consulting companies try to link what is happening in the United States with a possible scenario of demand cut in the same segments in Brazil. In other words, that Brazilian demand will have a very strong cut, that ethanol companies in Brazil will stop, slaughterhouses will stop due to lack of demand, and so on. Brazil has a different conception, although the economic effects are very similar. The exchange rate protects prices and even internal margins. So, there is no direct relationship between what is happening in the United States and the demand segments in Brazil. Could there be any cut in domestic demand? Of course, we have already pointed out a potential of 2 to 3 million tons of cut in domestic demand depending on the internal evolution of COVID-19.