June 15, 2012

Brazil expects higher corn crop sales in 2012

As the National Food Supply Company (Conab) estimates sales of 10.5 million tonnes and 11 million in 2012, against 9.5 million in 2011, Brazil may significantly increase its corn crop sales this year if the second crop of the country's record corn crop is confirmed.

Perspectives for international prices, however, are not good. Conab forecasts a second corn crop of 32.8 million tonnes, to be added to the 34.8 million tonnes of the first crop, resulting in 67.7 million tonnes in the 2011-12 period. The increase as against the previous crop's 57.4 million tonnes should be 18%, resulting in a record crop. To the market analyst at Conab, Thom Guth, the growth in the area cultivated and the climate are the main factors for the expansion. The climate affected the first crop in Rio Grande do Sul, but it did not result in problems elsewhere and should favour the second crop.

The sowing of the second crop is normally right after the harvesting of the summer crop, in the first quarter, and it takes place simultaneously with soy. Guth stated that a significant share of the second crop was sold in advance and that there is a great tendency for export in the second half.

Other analysts are more optimistic and forecast record exports. Guth believes that sales should not be affected by competition with Argentina and the US, as the Brazilian crop takes place between that of the other countries. "It may coincide with part of the US crop," said the Conab analyst. The US should also have a large corn crop and should start putting its product on the market in October. Most of Brazil's corn exports, according to Guth, are from July-September.

Added to this, Brazilian corn in the second crop is presenting good quality, according to the analyst, as up to now it has not rained during the harvesting period. He recalls that Brazil has won new markets like Japan, which had been importing corn from other countries over the last three years. Arab countries have also been buying more of the Brazilian product in recent years.

Last year, revenues with sales to the region totalled US$679.5 million, against US$556 million in the previous year, according to figures disclosed by the Ministry of Development, Industry and Foreign Trade. Corn prices, however, should not show themselves too rewarding to farmers and should be below the minimum price, according to Guth.

In Mato Grosso, for example, each bag was traded for BRL20 (US$9.7) early this year and has now dropped to BRL13.50 (US$6.56). The analyst stated that in the excellent conjecture of the North American crop, Brazil with a perspective of a record crop and Europe in crisis, the tendency is for lower prices. "Prices tend to fall more," he said.