South America Calling

With Brazil's second corn harvest underway, USDA and Brazil's crop agency, Conab, continue to have two different views of Brazil's corn production in 2024. USDA's estimate of 122.0 million metric tons (mmt) is down from the initial estimate of 129.0 mmt in May 2023, but is well above Conab's estimate of 114.1 mmt, or 4.49 billion bushels (bb). On June 27, the International Grains Council leaned Conab's direction with an estimate of 115.4 mmt.

In the bigger picture, corn prices in Brazil have fallen substantially since briefly trading above the equivalent of $9.00 a bushel in May, 2022. This week, September corn on Brazil's Bovespa exchange ended near the U.S. equivalent of $4.40 a bushel on July 4, near its lowest prices in more than three years and less than half of its peak just two years ago.

Here in the United States, producers are facing corn prices well below production costs, but Brazilian corn farmers, generally speaking, may be in even worse financial condition. A Feb. 8, 2024 article in Reuters explained how Brazil's grain exporters lobby, Anec, warned about increased bankruptcy filings were putting export commitments at risk. (https://www.reuters.com/…)

Earlier this year, the University of Illinois did a nice comparison of the direct costs of production between Illinois and the second corn crop in Mato Grosso. (https://farmdocdaily.illinois.edu/…)

The authors explained that direct costs in Brazil were less than half of Illinois costs per acre, but slightly higher on a dollar per bushel basis as Illinois held a big advantage in yield. The point is that Brazil's corn farmers are probably not any happier with today's prices than U.S. farmers are and, possibly less so.

Technically speaking, the immediate trend in September corn on the Bovespa exchange is down after posting six months of lower highs and lower lows. As in the U.S., Brazil's corn prices have become fundamentally cheap and should be near long-term support, but there are no hints of that happening just yet.

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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

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