BRAZIL CORN MARKET WATCH: Prices down slightly on harvest, strong Real

Corn prices in Brazil eased during June 7-11 in some of its key producing states as the harvest neared and the strengthening of the local currency Real against the dollar reduced the cost of corn imports, while also making export of the cereal less attractive.

In Mato Grosso, the largest producer of corn in Brazil, about 1.9% of the total 5.68 million hectares of corn planted in 2020-21 were harvested as of June 11, which is below 8.3% registered during the same period last year, the Instituto Mato-Grossense de Economia Agropecuria (IMEA) said in its latest report.

"The retraction of the dollar allowed the cereal to be imported at cheaper prices, so the Brazilian seller had to reduce prices to compete with the grain exported from Argentina and Paraguay. In addition, the fall of the dollar negatively impacted the competitiveness of Brazilian grain on the international market, which should reduce the traders' export drive. Thus, more cereal is available for local sales," national agricultural agency Companhia Nacional de Abastecimento (CONAB) said in its latest weekly report.

Although Brazil is the second-largest exporter of corn, livestock feed manufacturers, who are concentrated in the southern part of the country, buy corn from neighboring nations during the lean season as it is cheaper than transporting the cereal from Center-West Brazil where most corn is grown.

However, corn prices are still at very high levels compared to the previous year as the country's corn production has fallen steeply in 2020-21 due to drought.

Brazil's 2020-21 (February 2021 to January 2022) corn production forecast was cut to 96.39 million mt from 106.4 million mt projected in May by CONAB.

The agency also warned that there could be further cuts to Brazil corn production as there was a risk of frost in the southern states.

Brazil produced a record 102.586 million mt of corn in the 2019-20 season.

With production revised, corn exports from Brazil are now seen dropping to 29.5 million mt in 2020-21 from 35 million mt in 2019-20.

Brazil exported only 1.207 million mt of corn between February, the beginning of the marketing year, and May, which is well below the five-year average of 3.1 million mt for the period, customs data showed.

Customs data also showed that corn exports during the first eight business days of June in Brazil was just 1,622 mt.

On June 14, some sellers lowered their FOB Santos premiums on corn for August loading to 75 cents/bushel to CBOT September (U) contract, but there was no response from export buyers.

Bids were absent on June 14 as CBOT corn futures were falling and corn buyers from Asia were already well covered for their July and August needs.

FOB Santos premiums for August loading were seen lower than for September loading, an unusual occurrence, but a market participant said sellers were already done with their September programs and had become more aggressive with their August programs.

Moreover, buyers were absent amid a new rise in the cost of sea freight and logistical problems in China to unload the corn cargoes.

Favorable weather for harvest

During June 15-21, the accumulated rainfall in the Centre-West Region of Brazil is likely to be below 10 mm or no rain in some locations, Brazil's National Institute of Meteorology, or INMET, said in its forecast.

"Mostly dry weather is expected to continue across the safrinha corn areas this week, which will continue to favor drydown and harvesting of the crop. Rain may return to far southern portions of the belt during the 6-10 day period, mainly in Parana, but dry weather will continue elsewhere," MAXAR said in its daily weather report on June 14.