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11 May 2021 | 13:40 UTC
Corn market participants are awaiting the monthly crop reports from the US and Brazil that will be released on May 12, with many expecting a significant cut in Brazil's corn production due to drought.
Rainfall in most parts of the second corn crop-growing regions, except for Mato Grosso, has been in the range of 5%-50% of normal precipitation during April 10-May 9, according to data released by the National Centers for Environmental Prediction.
"Faced with late planting and possible losses of yield brought about by the prolonged drought during the time of plant development, there is the possibility of a sharp reduction of supply in regions affected by low rains," national agricultural agency Companhia Nacional de Abastecimento (Conab) said in its weekly report on May 10.
The total corn production in Brazil for the 2020-21 season is estimated at 95.5 million mt, compared with 103.4 million mt projected in April and 102.6 million mt in 2019-20, Brazil-based consultancy AgRural said on May 10.
The probability of a fall in second or safrinha corn production, drop in output of the first corn crop and low corn stocks have led to supply shortfall in the local market and prices have skyrocketed.
During, May 3-7, corn price indicator reached a new high of Real 100/60 kg bag ($316.5/mt), Centro de Estudos Avancados em Economia Aplicada, or CEPEA, said in a note.
As corn prices continue to surge amid supply tightness, livestock feed manufacturers are importing more from the neighboring countries even though Brazil is the second-largest exporter of corn in the world.
Most of the livestock producers are in the southern region of Brazil and it is cheaper for them to import compared to transporting it from the Center-West states, which is expensive.
During January-April, 758,137 mt of corn was imported, up 68% compared with the same period last year, customs data showed.
Even as the top three corn producers of Brazil namely Mato Grosso, Parana, and Goias have already indicated that second corn production will be below their initial estimates, the prospect of an even greater fall in output cannot be discounted as the weather forecast is not favorable.
The forecast for the Center-West region indicates precipitation during May-July is likely to be below or close to the average for the period, while in the southern region rainfall is likely to be below average in practically the entire region, Brazil's National Institute of Meteorology, or INMET, said in its quarterly forecast.
The water balance predicted by the INMET model indicates the predominance of water deficit in large parts of the Center-West region during May-July, except in the south of Mato Grosso do Sul.
In the short term, rains are expected to build across southern Brazil this week, including far southern Mato Grosso do Sul, southern Sao Paulo, Parana, Santa Catarina, and northern Rio Grande do Sul, MAXAR said in its weather report on May 10.
The rains in the far southern fringes of the safrinha corn belt will improve moisture slightly.
"However, dry weather will continue across central and northern Brazil, which will allow moisture shortages and stress to persist on the vast majority of the belt. No major improvements are expected next week either," MAXAR said.
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