Porto Alegre, June 25th, 2024 – The very dry weather in May and June made the 2024 second-crop harvest start earlier than usual. The first harvests have met contracts and both initial export and domestic demands. Nothing unusual for a second crop arrival, despite this year’s early harvest. This year’s differentiated facts are the firmness of prices in Mato Grosso do Sul due to local losses and a slightly greater difficulty for the South region to obtain supplies more calmly, at least for now. The attempt to generate a bullish argument in the middle of the harvest is tumbling on export prices, which, despite the strong devaluation of the real, do not find the strength to leverage higher levels at this moment.
The regional harvests of second-crop corn have advanced in late June. Many growers delay the harvest, taking advantage of the dry climate to reduce moisture as much as possible and not need dryers, therefore reducing expenses. The context of this 2024 crop follows what has been projected by Safras & Mercado. Harvests in Mato Grosso and Goiás continue with high yield, except for part of eastern Goiás, where later plantings suffered more from the May drought. In Matopiba, where the harvest pace has been better, yields are also good, of nearly 100 bags, except for spotty places with leafhopper attacks.
In Mato Grosso do Sul and northern Paraná, yields are low due to the fall drought, with significant losses in averages from the center-south of Mato Grosso do Sul to the north of Paraná and west of São Paulo. In other regions of São Paulo, there are losses due to the drought in May, and the harvest results reflect this situation. Minas Gerais is the state that is now raising concerns. There are losses in corn and sorghum, with no rain in May and June. The earliest crops escaped most of the problems, but the later crops are expected to cope with more significant losses.
All these situations are adjusted in our estimates, but, of course, as the harvest progresses we will have potential new adjustments, in the different regional conditions registered this year. However, as we have routinely assessed, we have a fundamental item that prevails in any size of the national crop: exports. Exports are starting this 2024 second crop. June has shipped 650 thousand tons so far out of a schedule of 1.1 mln for the period. July opens the schedule with 1.6 mln tons scheduled so far. In 2023, Brazil shipped 4.3 mln tons in July. This year up to July, 4 mln tons are committed to exports, compared to 5.5 mln last year. As we are at the beginning of shipments, all these data must adjust to the reality of international demand and internal flow needs.
The North Arc is expected to be the highlight of shipments this year, as Santos and Paranaguá are only expected to absorb larger volumes from September onward. Besides, as we have already assessed, Mato Grosso do Sul and Paraná are expected to export far less than in 2023 due to regional price conditions caused by this year’s production losses.
Despite these needs to empty the domestic market to generate some upward support, trading segments try to convince producers that prices will rise in the coming few days, even in the middle of the second-crop harvest. The fact is that the strongly devalued real could have brought a jump in domestic prices. Indeed, prices improved with the exchange rate, from BRL 58/59 to BRL 63/64/bag at ports, but with the lows in CBOT futures and premiums, last week did not record prices better than BRL 62 for shorter shipments. Premium cuts prevailed in trading companies.
Therefore, for corn prices to find a consistent upward space, a large part of the harvest must have been carried out, exports should reach a monthly average of 5 mln tons, and the weather in the United States should not be favorable in July. Of course, there is good domestic demand for corn at the beginning of the second-crop harvest, which reflects the concern of domestic consumers with the supply profile for 2024.
Copyright 2024 – Grupo CMA
