A tumble in Brazilian corn prices, as supplies from the ongoing safrinha harvest hit the market, could go into reverse as combines reach later-seeded areas expected to show lower yields.
Corn prices in Mato Grosso state, the top grower of the grain for the safrinha harvest, fell by 12.2% last week to $28.90 per 60-kilogramme bag, equivalent to about $3.61 per bushel, according to Imea, the state’s agricultural research institute.
The drop in prices – which tend to be far cheaper In Mato Grosso than in Chicago, to account for the extensive transport costs of getting crop from the land-locked state to Brazil’s ports – reflected “the increase in supply caused by the advance of harvest”, Imea said.
The institute pegged the state’s harvest at 16.6% complete, up 6.3 points week on week, and up from the 12.8% progress recorded a year ago.
‘Sellers reluctant to negotiate’
Separately, prices as measured in Campinas, Sao Paulo state were estimated tumbling “hard” by 15.8%, or R$7.98 per bag, last week, according to Cepea.
This fall was the biggest on records going back to 2004, the research institute said, adding that the decline was “linked to the advance of the second crop harvest”, and to a stand-off by buyers in expectation of further price declines.
However, Cepea flagged the potential for price support from producers stepping back from the market too, foreseeing demand from importers for safrinha supplies, which are typically the main source of Brazil’s corn exports.
“Many sellers are reluctant to negotiate at current values, expecting the return of [price] support, based on the expected increase in exports in the second half [of the year].”
‘Price may go up’
Imea said that, historically, prices have usually continued a seasonal decline into July, as harvest pressure tells.
“However, there is another scenario,” it added, flagging the potential for a tailing off in yields as harvest progresses.”
Such a decline could mean that the “domestic price of corn may still go up… when the most damaged plants, sown after the ideal window, are harvested”, and forecasts are realised of a weak result.
Imea has forecast Mato Grosso corn production at 21.2m tonnes in 2015-16, a drop of 18.9% year on year.
More downgrades ahead?
And even this may prove an overestimate, said Michael Cordonnier, the respected analyst and South America crop monitor.
“The situation has not improved during June so it is entirely possible that Imea will reduce their estimate again in their next monthly report,” Dr Cordonnier said, noting findings of a crop tour earlier this month by Cepea and agriculture and livestock industry group CNA.
“They found that the hot and dry conditions during April and May resulted in as much as a 50% reduction in corn yields on selected properties.
“The safrinha corn that was impacted the most was the corn that was planted after the ideal planting window had closed on February 25,” he said.
(Source – http://www.agrimoney.com/news/brazil-corn-price-sees-record-fall—but-may-revive-institutes-say–9695.html)