Just one year ago, we were witnessing a substantial two-month rally that took the price of December corn from a low of $3.64 on April Fools' day to well over $4.00 by early June. High temperatures here in the U.S. played a part, but the more substantial source of bullishness turned out to be hot and dry weather in Brazil which took their corn production down from 85.0 million metric tons the previous year to 67.0 mmt (2.64 billion bushels) last year.
Thanks to Brazil's smaller crop, U.S. corn exports have done better than usual since then and actual shipments are up 45% in 2016-17 from a year ago -- a bullish boost that has not been fully reflected yet in World Agricultural Supply and Demand Estimates (WASDE) reports. Now, however, Brazil is about to harvest its second corn crop of 2017 and there will be no repeat of last year's shortfall.
Early Friday, DTN's Senior Ag Meteorologist Bryce Anderson tweeted, "Reportedly, AgroConsult in Brazil pegs corn at 100 MMT this year. That is a 49% increase over last year's 67 MMT. Better weather for sure."
I had to pause and check. AgroConsult is a private firm and the new 100 mmt (nearly 4.0 bb) estimate was larger than USDA's 96.0 mmt, but not out of line as we had been reporting on weeks and weeks of good weather in Brazil. In fact, other than a brief spell of muddy roads in northern Brazil, I could not remember any serious weather threats in 2017 and wanted to check with Bryce.
He replied, "We saw favorable weather throughout the entire growing season, going clear back to last September. Such a trend was very beneficial to the full-season corn. This generous scenario was capped by a later start than normal to the dry season in Brazil, which helped the winter corn (safrinha) crop perform well also."
As I suspected, AgroConsult's new corn estimate was not out of line, but the day was not over. While I was still digesting the thought of 100 mmt, another tweet caught my eye from the Brazilian firm, Safras and Mercado. Loosely translated, the tweet said, "Corn: Brazil should harvest 106.437 mmt ..."
Keep in mind that these are private estimates and Brazil is just on the front end of its second harvest. If true, the estimate of 106.437 mmt comes to 4.19 bb and is a 59% rebound from last year's weather-stressed crop. That is a remarkable comeback by any standard and will raise bearish eyebrows as we head to the next WASDE report on June 9.
With these new estimates in hand, I paid extra attention to Friday's corn quotes, wondering if prices would sell off. To their credit, both July and December corn contracts held firm to modest gains on the day.
Estimating South American crops is always difficult business and this story is not over yet, but don't be surprised if we see higher corn crop estimates for Brazil in USDA's June WASDE report. As always, I will be paying attention to corn's market clues and, so far, prices are not tipping toward either direction, trading firmly in their sideways ranges.
Todd Hultman can be reached at Todd.Hultman@dtn.com.
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