The Van Trump Report

Why Brazil’s 2023/24 Corn Crop Could Be a Wild Card

After two back-to-back record corn crops, Brazil’s 2023/24 production is expected to take a few steps back. In its first forecast for 2023/24, the country’s crop forecasting agency Conab estimates Brazil’s farmers will harvest 119.44 million metric tons (MMT) of corn, down -9.5% from last year. The decline is a combination of falling profit margins, high input costs, and the El Niño weather pattern. However, with a surging US dollar improving the exchange rate and in turn the profitability outlook, some analysts think farmers could be inclined to add more safrinha (second crop) corn acres, which accounts for around 75% of the country’s total corn production.

For those not familiar, Brazil’s first corn crop is planted September – November and harvested starting in January. Safrinha corn planting begins following soybean harvest in January and February. Safrinha production makes up the bulk of both production and exports. Some farmers in Northern and Northeastern Brazil also plant third crop corn but production is very small at around 2 MMT in 2022/23, though it does continue to increase.  

According to Conab, Brazil corn farmers will plant -6.7% fewer first crop acres and -4.5% fewer second crop acres. In addition, Conab forecasts an overall -4.9% decline in productivity across all crops, for a total harvest of 119.4 MMT versus estimated production of 131.87 MMT in 2022/23. The US Department of Agriculture (USDA) in September pegged Brazil’s total 2023/24 corn production at 129 MMT.  

USDA, as well as other crop forecasters, have been anticipating production hits due to the El Niño weather pattern that tends to reduce rainfall and raise temperatures in the North and Northeast and increase rain in the South region. Conab notes that the El Niño weather pattern is already impacting Brazil’s first corn crop outlook. For instance, in Rio Grande do Sul, Brazil’s southernmost state, heavy rains have considerably delayed first corn planting, Conab said. Still, in the week ending October 7, Brazil’s first corn crop was 37% planted compared to 39% last year, according to AgRural, which is not a dramatic difference.

The bigger wild card right now seems to be the safrinha crop, which by far has the biggest impact on international markets. The biggest production states are Mato Grosso leads with nearly half of production, followed by Paraná (almost 15%), Mato Grosso do Sul (13%), Goiás (13%), and Minas Gerais (4.5%). These five Brazilian states represent 90% of the total corn produced in Brazil. The biggest influence on safrinha production weather-wise will likely be rainfall from November through January. Brazil’s dry season starts around March, so if conditions are already overly dry come safrinha planting time in January, farmers may not want to risk it.

Another big influence on Brazil’s corn acres this year is profitability, or rather the lack thereof. Some farmers have already indicated that they might swap corn for more profitable crops this year. In the top corn production state of Mato Grosso, second crop production in 2023/24 is expected to fall more than -13% after many farmers lost money in 2022/23 due to low domestic corn prices and high input costs, according to the Mato Grosso Institute of Agricultural Economics (Imea). Recently, the profitability equation has greatly improved, however, and farmers are being advised to stick with second crop corn. This is largely because of the skyrocketing US dollar and still weak Brazilian real currency.        

No matter how big Brazil’s corn output ends up being, the country may struggle to get it to export markets. Drought conditions in the Amazon are currently causing considerable trouble along Brazil’s key waterways, particularly to the west of Manaus, which is in the northwest. According to Brazil’s Agriculture Ministry, navigation along the Amazon’s upper tributaries, often tricky in the dry season, has become especially difficult. Many of these waterways have been key to boosting Brazil’s export capacity through its northern routes.  

Barge loads have been reduced along some rivers, include the Madeira River where firms such as Cargill, Bunge and Amaggi operate, according to Reuters. They also reported that low river levels have affected docking of transoceanic ships around Manaus and pushed up pilotage costs. Meteorologist Gilvan Sampaio, from Brazilian space agency INPE, told Reuters that this year’s drought in the Amazon could prove to be the worst on record. He said the dryness might last through 2024 if El Niño intensifies. Meaning high shipping costs could offset any favorable exchange rate gains. (Sources: Conab, USDA, Reuters, CZapp)

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