Domestic market of corn has strong retention and may help supply in the coming months

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Porto Alegre, July 28, 2020 – The Brazilian market has some seasonal factors that have changed over the past few years. An ever-smaller summer crop, in contrast to an increasingly larger second crop, establishes an off-season profile in the first semester and the actual crop in the second semester. Therefore, we can say that we are at harvest now. However, the internal trading context seems very different from normal. The delayed harvest, the capitalization of growers, the structure to retain corn for a longer time, and some panic in the consumer sector sum up this corn price firmness in the middle of the harvest of the second crop. Parallel assessments are related to the size of production in Paraná and Mato Grosso do Sul, as well as to the flow of exports.

     The second crop has been the major point of supply in Brazil in the business year. It makes it possible to meet all domestic demand, a good flow of exports, and even allows carryover stocks for the following year. On the other hand, the summer crop has its growth limitations due to competition with soybeans, in particular, in the states where it is possible to grow the corn’s second crop in the winter. Well, this is already known by our domestic market, and the seasonality is very clear to everyone, that is, greater difficulty in domestic supply in the first half of the year, and a more comfortable supply in the second.

     For the second crop, port prices establish an important command for the formation of prices. This is due to the fact that practically half of the Brazilian second crop is destined for exports. This higher or lower flow, the exchange rate, external prices, and port levels establish internal competition in this harvest period. Stronger shipments, with more solid prices, help support domestic prices and vice versa.

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