Porto Alegre, August 17, 2020 – The corn harvest in Brazil enters its final phase. Many crops are very late and will progress slowly over the next fifteen days. However, information on forward business continues to clash with the reality of the physical market. The size of the demand from exporters and domestic consumers does not reflect the high percentage of direct forward purchases from producers. The fact is that prices remain very firm and are in line with the selling intention by producers. The August export registrations reached 7.3 million tons, the same record level as in August 2020.
Corn commercialization at this time of harvest of the second season is surprising for a year without external bullish factors. Prices on the CBOT hit twenty-year lows. The United States has a record crop. Argentina with record production and exports. Brazil with a good crop of corn, very similar, in volume, to that of 2019. And domestic prices in Brazil are ever rising.
In our last issues we have already evaluated the factors that are adding to this price environment. However, we must point out that what is expected from early commercialization is far from reality. The indication of 90% of sales in Mato Grosso is far from reality. This percentage is equivalent to 30 million tons. If there data were correct, all trading companies and internal consumers would be well stored not accepting high prices now. What has been seen is a strong demand by trading companies for October/November shipments, and regional consumers accepting to buy at high prices. This standard is repeated in other states. And these data are delicate because it is rumored that the 2021 second crop would be 40/50% negotiated, which is really far from reality. This same harmful information conflict may occur next year.
The second point is that the prices of fattened cattle, chicken, pork and even milk have high levels. This helps corn buyers to accept high prices as well. When this factor is combined with little selling intention by producers, prices gain space for strong support, and, with new levels every week, retention continues. We do not know if in case of sharp decline in prices (because of the exchange rate, exporters or domestic buyers), producers will decide to sell or retain even more.
As pointed out, there is no external bullish factor to consolidate this internal movement. However, exports have been strong in August. Export registrations reached nearly 7.3 million tons in August, the same level as the August 2019 record. August shipments have already reached 2.9 million tons. Now, in the accumulated result for the year, 14.5 million tons are already definitively set for exports. There are 20 million tons left for the year’s export target, which must be reached until January.
Agência SAFRAS Latam
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