BRAZIL CORN MARKET WATCH: Production cut expected as drought continues

New Delhi — Brazil's second corn production forecast for 2020-21 is likely to be cut this month as crops in some of the key producing states are reeling under drought.

The second corn production outlook for Mato Grosso, the largest producer, was cut to 34.6 million mt in 2020-21 from 35 million mt projected earlier, which will be also lower than the last season's output of 35.45 million mt, the Instituto Mato-Grossense de Economia Agropecuria (IMEA) said in its latest report.

"The late sowing of the cereal and the lower volumes of rain in the state have resulted in difficulties in the development of the grain in some areas of Mato Grosso. In addition, rain forecasts for the coming weeks in the state are not encouraging," IMEA said in the report.

The second corn crop production outlook for the Brazilian state of Parana has been also cut to 12.23 million mt in 2020-21 from the earlier projection of 13.38 million mt, according to recent estimate released by the State Secretariat of Agriculture and Supply.

In 2019-20, Parana, which is the second-largest producer, produced 11.9 million mt of second corn crop.

Moreover, in the third-largest corn-producing state of Goias, the safrinha or second corn crop situation remains critical due to the low volume of rainfall in the state.

"Some losses are already seen and may result in a drop in production expectations in 2020-21," the Instituto para o Fortalecimento da Agropecuaria de Goias (IFAG) said in a report on May 3.

In April, the national agricultural agency Companhia Nacional de Abastecimento (Conab) forecast Brazil's second corn production at a record 109 million mt of corn.

Meanwhile, corn prices continued to make fresh highs in Real terms as consumers needed the cereal for their immediate requirements, while the supply remained very limited, the Centro de Estudos Avançados em Economia Aplicada, or CEPEA, said in a note.

The possibility of lower productivity of second-crop corn due to the fear of rainfall deficit in Brazil during the development of crops is one of the factors that is driving the local as well as the international prices, Conab said in its weekly report.

Weather outlook

The weather forecast for the next few days is not favorable for the crops that are currently under severe moisture stress in Brazil.

In the Midwest region, rain is likely only in northern Mato Grosso during May 3-10, that too will be less than 10 mm throughout the period, Brazil's National Institute of Meteorology, or INMET, said in its forecast.

In the southern region of Brazil, rain forecast is only for the center and south of Rio Grande do Sul, with likely precipitation between 20 and 60 mm, INMET said.

"Virtually no rainfall is expected across the driest portions of the safrinha corn belt over the next 10 days, which will lead to further declines in soil moisture and will maintain significant stress on the corn crop," Maxar said in its weather report on May 3.