Todd's Take

A Tale of Two Corn Prices

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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March corn prices in the U.S. are so weighed down by increased supplies that they have only challenged the 100-day average once in four months. July corn in Brazil, on the other hand, has been climbing higher since October and is priced at the U.S. equivalent of $6.39 per bushel. (DTN ProphetX chart by Todd Hultman)

Making crop estimates early in a season is never easy as all the uncertainty is still ahead. That is especially true for estimating Brazil's corn production as roughly two-thirds of the smaller first corn crop has been planted, while Brazil's larger, second crop (safrinha) won't normally be planted until January and February. With a lot of variables not yet nailed down, USDA and Brazil's crop agency, Conab, find themselves holding two distinctly different views.

USDA currently estimates Brazil's corn production at 129.0 million metric tons (mmt) or 5.08 billion bushels (bb) in 2023-24, down 6% from a record high of 137.0 mmt in 2022-23. Conab, on the other hand, estimates Brazil's corn production at 118.5 mmt, or 4.67 bb, in this new season. Which one looks more accurate? I have to go with Conab. USDA's estimate has been on hold since May 2023 and has shown no acknowledgment of Brazil's weather problems.

Looking at Brazil's first corn crop, Conab is estimating corn acres will be down 9% from a year ago and production will total 996 million bushels (mb), down 7% from a year ago. Thanks to adverse weather, the first corn crop will only represent 19% of Brazil's total corn production in 2023-24. Rio Grande do Sul and other southern areas have been drenched by an extraordinary amount of rain since September and flooding has been an issue. A loss of corn acres in southern Brazil seems highly likely. A significant part of the first corn crop is also in northeastern Brazil where conditions have been drier than normal.

Even though Brazil's second crop hasn't been planted yet, a stretch of hot and dry conditions before Thanksgiving threatened soybean conditions in central Brazil and may or may not lead to a lack of soil moisture in January and February when soybeans are harvested and corn is planted. A return of rain after Thanksgiving helped improve conditions, but the region is now in another hot and dry stretch that is expected to last until Dec. 19. Starting Dec. 19, the forecast turns favorably wetter into and through January, but keep in mind, this is weather we're talking about -- there are no promises.

As Conab sees it, corn acres for the second crop will be down 4.5% in 2024 and production will total 3.59 bb, down 11% from last year. The second crop is expected to account for 77% of Brazil's corn production in 2023-24. Throw in 78 mb of production from a tiny third harvest and that is how Conab arrives at its total estimate of 4.67 bb.

Conab's yield estimate for 2023-24 is 90 bushels per acre (bpa), meager by U.S. standards and a long way from David Hula's new world record of 623.8 bpa (see https://www.dtnpf.com/…). It is, however, the third highest yield by Brazil's standards. Given this year's weather challenges, there is a risk final yields will end lower than Conab's current estimate. Just maybe the U.S. will recapture its title as the world's top corn exporter for one more season.

Not only is there disagreement between the country's two crop agencies, but there is also an interesting disagreement in local prices. March corn in the U.S. is languishing in a long, gradual downtrend and closed at $4.79 1/4 on Thursday, Dec. 14. July corn on the Bovespa exchange, Brazil's new-crop month, was slightly lower Thursday, but is in a two-month uptrend that has taken prices to their highest level in seven months, the U.S. equivalent of $6.29 per bushel. More familiar with their own crop conditions, it is interesting that Brazilians are more bullish about their prospects for corn prices in 2024 than we Americans, fresh off of a record harvest. As usual, weather will have the final say, but it may be Brazil knows something the U.S. is overlooking.

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

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

Follow him on X, formerly Twitter, @ToddHultman1.

Todd Hultman