July 7, 2020

 

Brazil exports lowest corn since 2012

 

 

Brazil's corn exports so far in 2019-20 have been the lowest since 2012, primarily due to low stocks after Brazil exported a record crop in 2018-19, S&P Global Platts reported.

 

The corn exports in the new marketing season that began in February are off to a slow start compared with the last season. It is likely to miss the current forecast by the country's agricultural agency Companhia Nacional de Abastecimento (Conab).

 

According to Brazil's customs data, Brazil exported 864,235 tonnes of corn during February-May as against 3.73 million tonnes during the same period last year.

 

The FOB price difference between the US and Brazilian corn was around US$13/tonne toward the end of June 2019, while it was hardly US$3/tonne this year in June end.

 

Under these circumstances, Brazil's national agricultural agency Conab forecasts corn exports at 34.5 million tonnes in the 2019-20 marketing season, which refers to the period February 2020-January 2021, compared with 41.07 million tonnes in 2018-19.

 

Conab estimates Brazil's 2019-20 total corn supply, which refers to production and carry-in stocks, at 112.9 million tonnes.

 

With corn exports forecast at 34.5 million tonnes in 2019-20, it would account for 30.5% of the total corn supply, while domestic consumption at 68.5 million tonnes would represent 60.6% of the supply.

 

On the face of it, current export projections for Brazil looks like a big drop from the previous season. However, an analysis of the domestic consumption and export pattern for the last 10 years shows that exports usually did not surpass 30% of the available supply when domestic consumption was 60% or above, except for 2012-13 and 2018-19.

 

Both the 2012-13 and 2018-19 seasons witnessed supply issues in the US, which helped Brazilian exports.

 

In 2012-13, US corn crops were destroyed by a severe drought that led to a spike in imports, while 2018-19 saw heavy rains in the US during the sowing months that delayed the harvest and made US corn prices uncompetitive in the international market.

 

However, corn production is expected to recover in the US during its new 2020-21 marketing year from September 2020-August 2021, while Argentina, another key corn competitor, is seen harvesting a near-record crop in its 2019-20 marketing year.

A collapse in ethanol demand due to COVID-19 has also led to a drastic fall in corn consumption in the US.

 

Moreover, with corn exports starting at a slow pace this season in Brazil, by the time exports ramp up, Ukraine will also enter the market with its new harvest.

 

All these factors continue to signal robust availability of supplies in the markets so far.

 

During the July-January period of the 2018-19 season, Brazil exported 36.13 million tonnes of corn. But this was when the corn supply in the domestic market was at 117.82 million tonnes.

 

It needs to be seen whether Brazil can ship about 33.5 million tonnes during the remaining part of its current marketing season, when the supply is estimated to shrink from prior-year levels to nearly 113 million tonnes.

 

It is important to note that the corn production number is not final yet, and many analysts predict corn output in the country to be around 99 million-100 million tonnes, while Conab's current estimate is around 101 million tonnes.

 

"Based on a production of 99 [million tonnes] in the 2019/20 season and a local consumption at around 66.5 [million tonnes], I believe Brazilian corn exports may be in a range from 31 [million] to 33 [million tonnes] in the 2019/20 season (vs 41 [million tonnes] in the previous season)," said Victor Ikeda, Rabobank grains and oilseeds analyst.

 

Although the corn volume produced is only two million tonnes below last season's 101 million tonnes, Brazil's beginning stocks are seen much lower this season at around 11 million tonnes, down 32.1% from the previous season levels, Ikeda added.

 

There is also a concern of falling feed demand due to COVID-19, which is expected to lead to lower consumption levels in big corn buying markets like Southeast Asia.

 

"The combination of quarantine measures, negative economic growth and lingering ASF [African swine fever] impacts is expected to reduce animal protein consumption and production in Southeast Asia in 2020, which will translate to lower animal feed consumption in the region," Rabobank recently reported.

 

The total demand for hog feed, broiler feed, layer feed and aquafeed in Vietnam, Indonesia, Malaysia, the Philippines and Thailand is likely to decrease 3.5% on-year at 92.8 million tonnes, according to Rabobank estimates.

 

Against this backdrop, it looks increasingly difficult for Brazil to achieve its current export forecast, which is already down 16% on-year.