The Van Trump Report

Checking in on Brazil’s Second Corn Crop

Global corn production is forecast to swell to record levels this year to more than 1.2 billion metric tons, just above the previous record crop in 2021-22, according to the latest USDA estimates. That in turn is seen pushing global ending stocks to the highest levels since 2018-19 at more than 322 million metric tons. With US corn already in the bin, the last major haul this marketing year will come from Brazil, where second, aka “safrinha,” corn crop output is still very much up in the air.  
For those not familiar with Brazil’s crop production cycle, the “safrinha” corn crop is planted directly after soybeans are harvested, typically in January-March. The safrinha crop, which means “little harvest” in Portugese, ironically now accounts for about 70% of Brazil’s total corn production and three-quarters of the country’s total corn exports. Safrinha harvest typically runs June-August. The first corn crop, sometimes referred to as the summer crop, is usually harvested in February-April and primarily supplies the domestic livestock market.  

In total, Brazil’s crop agency Conab pegs production at 113.70 MMT versus 124.00 MMT forecast by the USDA. Both of those estimates are substantially smaller than last year’s monster crop that USDA estimated at 137 MMT, though Conab is lower at just under 132 MMT.

Conab in early February cut its first crop corn harvest estimate by -3.2% to 23.6 million metric tons. That’s down -13.8% compared to 2022-23 thanks to “adverse situations such as high rainfall in the south of the country and low rainfall in the center-west, accompanied by high temperatures, among other factors”, Conab said.

Safrinha production was likewise trimmed by Conab, with production estimated at 88 MMT, down -3.4% from the January estimate and -13.9% lower than the 102 MMT harvested last season. However, agribusiness consultancy AgRural recently boosted its outlook for the second crop to 91.2 MMT from 86.3 MMT.

Uncertainty surrounding safrinha production stems from a combination of factors. Acreage in particular remains highly debated. Conab, for instance, cited an expected -7.6% decline in corn acreage behind its production cut. Meanwhile, AgRural said it bumped its forecast due to evidence that farmers were planting a larger area than initially estimated.

Rainfall, or a lack thereof, is one issue that’s complicating the acreage outlook. Second-crop corn is ideally planted immediately after soybeans come out of the ground in January-February. If farmers push planting into March, they risk running short of soil moisture when the rainy season ends, typically in early May.

The careful moisture calculation means that rainfall levels leading up to second-corn sowing season plays a big role in farmer planting decisions. Thanks to the El Niño weather pattern, key Brazil safrinha regions saw little rain in October and November, leading to soybean damage and widespread replanting in some regions. A return of rain in December helped revive soybeans but experts say it may not be enough to support a second corn crop many growers had planned. What’s more, lingering El Niño impacts are currently expected to bring an early end to this year’s seasonal rains.

While Brazil farmers in the past may have been willing to roll the dice that the needed moisture materializes, financial considerations may hold more growers back this year.  Corn prices in Brazil are currently below the cost of production and farmer input purchases for safrinha corn have reportedly been as much as -20% lower than last season in some key production areas. There’s talk that producers in some parts of Brazil are switching second-crop corn acres to alternative crops such as cotton, sorghum, wheat, etc… 

Brazilian grain export lobby Anec, as well as other industry groups, have raised alarms about the rise in farmer bankruptcies in Brazil, which they say could impact the delivery of committed grains throughout the season. Anec warned that the increase could hamper grain traders’ ability to complete their export programs.  Anec represents major global grain merchants, including ADM, Bunge, Cargill, and China’s Cofco, among many others. (Sources: Soybean & Corn Advisor, USDA, Conab, IMEA, Reuters)

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