BRAZIL CORN WATCH: Prices surge on output cuts, imports set to rise in 2021

Local corn prices in Brazil are surging even during mid-harvest following reports of further output cuts in 2020-21 and the country's corn imports are expected to hit a record high despite Brazil being the second-largest exporter of corn in the world, reports from government and private agencies indicated.

Brazil's 2020-21 corn crop is marketed during February 2021-January 2022.

The CEPEA corn indicator tracked by Brazil-based Center for Advanced Studies on Applied Economics (CEPEA) rose to Real 102.44/60 kg on July 28, not far from the nominal highest price of Real 103.23 recorded in May.

Buyers are finding it difficult to procure corn in adequate volumes and prices are continuing to rise, national agricultural agency CONAB said in its weekly report.

Producers continue to pay attention to the second corn harvest and the reduction in the yield as a result of drought and frost, CEPEA said in a note.

The second corn crop estimate for Mato Grosso, the largest producer in Brazil, was cut to 31.91 million mt in 2020-21, down 88,060 mt from the previous report and also down from 35.45 million mt produced in 2019-20, the Mato Grosso Institute of Agricultural Economics (IMEA) said in its latest report.

"Regarding productivity, with the harvest entering its final stretch, it has been possible to better assess the impact of weather on crops," it said. "As a result, productivity showed a readjustment of -0.28 percentage points compared to the previous report, with a yield of 93.54 sc/ha [1 sack = 60kg]."

The second corn production estimate for Parana -- the second-largest producer of the cereal -- was also cut to 6.11 million mt in 2020-21 from the previous estimate of 9.82 million mt, Parana's state agriculture department DERAL said in a report July 29.

At the beginning of this season, Parana had been expected to produce 14.6 million mt in 2020-21, up from 12.17 million mt in 2019-20.

The loss in the second corn crop yield in Parana was primarily due to drought during much of the season.

"It should be noted that regions of Parana will have difficulty in fulfilling contracts for delivery of the cereal after finding significant losses caused by frost," CONAB said in its weekly report.

With a corn shortage in the domestic market, exports in July slumped 50% year on year to just under 2 million mt, data released by the customs department showed.

Meanwhile, corn imports in July rose to 144,317 mt, up from 44,392 mt in July 2020.

Brazil already imported nearly 1.1 million mt during January-July, compared with 1.37 million mt in the whole of 2020.

Brazil's highest corn imports were in 2016 at 2.9 million mt.

Analysts expects Brazilian corn imports to touch fresh highs this year.

"Producers report difficulty in fulfilling delivery contracts, while buyers look to imports to meet immediate needs," CONAB said in its weekly report. " Domestic prices are expected to remain high."

Brazil is likely to see its largest volume of corn imports ever in 2021, Parana's DERAL said.

Although Brazil is usually the second-largest corn exporter in the world, the southern states often import from Paraguay and Argentina as it is cheaper than transporting corn from the Midwest region of Brazil where the bulk of the corn crop is grown.

The animal protein industry, a major consumer of corn feed, is concentrated in southern Brazil.

Harvesting of Brazil's second corn crop is currently in progress.

The second corn crop harvest across nine states, accounting for nearly 92% of the area, was 51.6% complete as of July 31, from 64.8% around the same time last year, CONAB said in its latest weekly report.

Second corn harvesting in the major producing states of Brazil