BRAZIL CORN MARKET WATCH: Prices remain high due to doubts over crop size

New Delhi — Corn prices in Brazil remain high despite the smaller-than-expected cut to Brazil's 2020-21 production outlook, amid market concerns about the lack of adequate rainfall and persisting drought in the key producing regions.

Brazil's 2020-21 corn production forecast was cut to 106.4 million mt, still a record crop, from the 109 million mt projected in April, national agricultural agency Companhia Nacional de Abastecimento (CONAB) said in its monthly survey on May 12.

However, the US Department of Agriculture cut Brazil's corn production forecast to 102 million mt for 2020-21 from 109 million mt projected in April.

There is a possibility of further production cut in the next month crop survey, Parana's State Secretariat of Agriculture and Supply acknowledged in a recent report.

"Corn prices remain above Real 95 per bag of 60 kg (price received by the producer). The prices are likely to remain high, precisely because of the expectation of lower national production," the state department of Parana said.

Parana is the second-largest corn producing state in Brazil.

"Prices maintained the upward trend in the week analyzed. However, the fall in international prices and the appreciation of the Brazilian currency reduced import costs," CONAB said in its weekly report on May 17.

Producer price in the spot market of Brazil

Source: CONAB, unit: Real/60 kg bag

Brazil's corn import have been higher than the usual levels despite being the second-largest corn exporter in the world.

During January-April, 758,137 mt of corn was imported, up 68% compared with the same period last year, customs data showed.

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.

Rain relief for south

Some parts of the southern states, which have been hit hard by drought, are likely to see rains in the coming days, mitigating crop damages, according to latest weather forecast.

Rains are expected to be more significant in northern and southern regions of Brazil this week.

During May 17-24, rainfall in the southern region of Brazil is expected to be in the range of 5-30 mm, while reaching up to 60 mm in some areas which is to the west of Rio Grande do Sul, Brazil's National Institute of Meteorology, or INMET, said in its weekly report.

"Rainfall is expected to develop across southwestern portions of the belt this weekend and early next week, which should lead to some improvements in Mato Grosso do Sul and Parana," MAXAR said in its daily weather report on May 17.

However, in the Centre-West Region, which accounts for the bulk of the corn output, the largest accumulated rainfall is forecast for northern Mato Grosso, and rainfall is likely to be sparse in the other parts of the region, INMET said.

Warm and dry weather is expected to continue across the second or safrinha corn crop areas in Brazil this week, which will maintain significant stress on the crop, MAXAR said in its forecast.