Conab cuts Brazilian corn prospects again

10.08.2016

Conab, the Brazilian crop supply agency, cut its forecast for 2016 second corn crop by 460,000 tonnes, to 42.59m tonnes, as supplies of corn grow ever tighter.

The lower harvest will push exports down to 20.0m tonnes this crop year, Conab said, a drop of more than 10m tonnes year on year.

Still, this is some 1.5m tonnes higher than the Brazilian export forecast from the US department of agriculture.

Falling yields

Conab forecast Brazil's total corn output, including the early sown crop and the safrinha, or second crop, which is currently being harvested, at 68.48 million tonnes, down from 84.67m last year, and about 1.5m tonnes below the USDA forecast.

The fall in production comes thanks to much lower yields, thanks to irregular rainfall in the safrinha regions.

"The weather was largely responsible for the poor performance of the crop across the country, causing a strong impact on production," Conab said.

Prices surge

The shortfall of the Brazilian crop is causing prices in Brazil to surge.

A sustained period of weaker currency values encouraged a rash of selling in the previous crop year.

This included the forward selling of a large volume of the 2016 harvest, which is continuing to flow out of Brazilian ports, despite the domestic shortage.

So the shortfall of the safrihna crop means that livestock producers are struggling to source supplies.

Long wait for fresh supplies

Even if the next crop sees no disruptions, it will be at least ten months until the domestic shortfall eases.

"Brazilian farmers are expected to plant 5-10% more full-season corn [in the next] growing season, but the [first] corn crop only accounts for approximately one-third of Brazil's total corn production," said analyst Dr Michael Cordonnier.

"A more sustained relief from the very tight corn supplies will only be achieved when the 2016-17 safrinha corn harvest gets underway next June and July]. Until then, it is anticipated that Brazil will be forced to import corn in order to sustain the livestock industry in southern Brazil.

Looking further afield

Conab forecast Brazilian corn imports over the 2015-16 season, which runs until February next year, at 1.5m tonnes.

This is in-line with the USDA forecast.

Brazil has been importing corn from Argentina and Paraguay, in a bid to make up for the shortfall, but is having to look further afield.

So far this season, regulations on the imports of genetically modified varieties of corn have prevented heavy shipments from the United States.

But last week agriculture Minister Blairo Maggi said he was working for a solution to those restrictions, a good indicator of just how much of an issue the shortage of livestock feed is proving.


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