Brazil has price support ‘bubble’ at harvest of the second crop of corn

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The harvest of Brazil’s 2020 second crop is advancing at a slightly faster pace in Mato Grosso, and at an early stage in other states. This harvest period, in line with the planting carried out this year, has been one of the main points for a certain speculative ‘bubble’ with domestic and port prices in the short term. We call it ‘bubble’ because the harvest is still advancing, export premiums are high, and there is no internal supply problem to generate some more aggressive upward movement before most of the second crop is allocated for the market. Naturally, the exchange rate volatility, the good flow of corn towards the port, the delay in the coming of the second crop, and the slow fulfillment of contracts are beneficial at this moment. However, what has really distorted the market configuration is the exaggeration in the profile of early domestic sales, as if in the remainder of 2020 there were no more supply to be negotiated in the Brazilian market.

Information always influences markets and opinions. Depending on the information criterion, the market may be panicked by short or excess supply. Mato Grosso has worked over the years to make early reports on the second crop. However, in 2020, for example, we ended May and June still negotiating the 2019 second crop in local stocks, but in November 2019, sales were already said to be 100% complete, that is, without existing offers. In the second crop of 2020, this type of information continues at the same time that the media is striving to show corn stocks outside of warehouses and crowded silo bags.