The past few months have been hard on the corn market with few, if any, inputs to turn prices around. Along with the woes of coronavirus and a big jump in U.S. plantings this spring, the prospect of another big Brazilian corn crop has compounded the pressure. USDA currently pegs the 2019 Brazil crop at 101 MMT, the same as the record high of 2018.
But one key feature of corn production in Brazil is its split-crop season. The second-season or “safrinha” corn crop is the key to their success. This crop is planted after soybeans are harvested and at roughly 70% of total corn production have given Brazil a huge leg up in production capacity in the last decade.
The dilemma with second-season corn is it is subject to big weather risks. If not planted on time, the corn crop is pushed later in the season when dryness is the norm and cold weather can put an untimely end to the crop’s development.
How likely is it that USDA revises their forecast for Brazil? In the last 13 years, USDA’s final Brazil production forecast has an average deviation from their April forecast by 7%. By contrast, USDA’s average adjustment to the U.S. crop between the July report and the final estimate is only 2%. So there is a strong tendency to see sizable revisions to Brazil.
Looking at this growing season, this year there are two prevailing regional trends. First, in the Central-West region where the largest second-season corn state of Mato Grosso is located, the growing season has been good so far. Planting was mostly on time here and normal precipitation and temperatures have expectations running at normal yields. But to the south, the converse has been true. A wet January kept farmers from getting the soy crop harvest on time and, as such, planting here was delayed. Furthermore, precipitation has been hard to come by in the last 90 days with precipitation totals in Parana, the second-largest safrinha corn producer, running at 30-year lows. However, given the lateness of the crop, there is still time to recover.
The charts above illustrate the current year growing season weather metrics in green, as well as for 2016 and 2018. These were years when there were big drops in Brazil’s safrinha corn crop. In 2016 (blue line), Mato Grosso had substantially below normal precipitation, and a hard freeze in early May caused the crop to be down 16% from early season projections. In 2018, Southern Brazil (Parana) had early-season precipitation but when it was needed in March/April, there was no moisture to be found. This year is seemingly a case of limited moisture in Southern Brazil. Below are FBN’s yield forecasts by state based on current weather. These forecasts reflect the divergence between the growing conditions across Brazil, but the key point is we believe there are several key states to watch, including Parana and Mato Grosso do Sul where yield potential has been limited by weather.
Brazil still has sizable uncertainty about its corn crop. Growing conditions in Parana and Mato Grosso do Sul over the coming month will be key to keeping USDA’s estimate of 101 MMT. Right now the 10-day forecast shows slim chances of any measurable precipitation in these key states. If the crop does not meet expectations, this could open the door for foreign buying of U.S. supplies this summer and into fall.
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