Brazil slashed its forecast for domestic corn output, citing the hurdles to sowings of safrinha crop from weak prices and a slow soybean harvest, and the setback to some already-planted crop from dry weather.
And while Conab, the official Brazilian crop bureau, raised by 1.12m tonnes to 111.6m tonnes its forecast for domestic soybean output in 2017-18, the upgrade fell short of market expectations.
For corn, the bureau cut its estimate for production by 4.34m tonnes to 88.01m tonnes – a drop of 9.84m tonnes year on year.
The revision was even sharper than that expected by investors, who had braced for a steep downgrade given that Conab was in this month’s crop report releasing its first detailed forecasts for the safrinha crop, rather than using last-season figures as working estimates.
Investors had forecast an 89.3m-tonne figure, according to a Bloomberg poll.
The lower figure reflected in part an expectation that this year’s safrinha crop, planted largely on land being vacated by the ongoing soybean harvest, will tumble by 4.12m tonnes to 63.26m tonnes, thanks in the main to a drop in sowings.
In Mato Grosso, the top safrinha-corn growing state, area was seen falling by some 270,000 hectares, in the face of “slow planting”, Conab said.
“By the end of January, about 15% of the area had been planted, with less than a month to go to the end of the ideal planting window.”
‘Sharp drop in planting intentions’
Furthermore, factors such as “low cereal prices and options for other second crop crops have discouraged” growers from attempting to seed the crop.
Brazilian corn prices, at R$33.41 per 60 kilogramme bag, are down 8.1% year on year, according to research institute Cepea, compared with, for example, a 0.1% slip in Chicago prices over the same period, with the performance gap a reflection of currency moves.
In Parana, the second-ranked safrinha producing state, Conab forecast a 10.9% drop in area, citing factors including a lower willingness as well as ability to sow the crop.
The bureau flagged a “sharp drop in [farmers’] planting intentions in relation to the previous crop, attributed to the low cereal price and, to a lesser extent, the delay in harvesting the summer [soybean] crop, which results in delay in planting of corn”.
Meanwhile, the bureau also lowered its forecast for the production of first-crop corn too, some of which has been harvested, by 430,000 tonnes to 24.75m tonnes, as a downgrade to the crop in Rio Grande do Sul more than offset upgrades to expectations for states such as Sao Paolo and Piaui.
The estimate for the Rio Grande do Sul harvest was cut by more than 500,000 tonnes, to 4.74m tonnes, costing it its position as the top main crop corn-growing state, and with the downgrade blamed on a hit to yield expectations from dry weather.
“The water shortfall seen in practically all of December and part of January brought great damage to yield prospects,” the bureau said.
Central areas of Rio Grande do Sul – which borders Argentina, where a lack of rain is also worrying growers – had been worst affected, with Conab highlighted that “drought occurred during the flowering period and beginning of grain filling”, a sensitive developmental period.
Crop losses in the area had been “in the order of 30-40% in relation to initial expectations”.
For soybeans, the increased production estimate reflected improved expectations for yields in the top growing state of Mato Grosso, and in nearby Goias.
However, the upgrade fell short of analyst expectations, with a broker poll by Bloomberg foreseeing a 113.0m-tonne crop figure.
Futures in both corn and soybeans made modest gains after the data, recovering from small losses to show small gains.
March corn futures stood up 0.1% at $3.65 ½ a bushel in early deals in Chicago, where soybean futures for March stood 0.2% higher at $9.84 ¾ a bushel, although US Department of Agriculture data due later on Thursday could prove a bigger influence on prices.