South America Calling

Brazilian 2015-16 Second-Crop Corn Planting Expected To Surge

Brazilian farmers have not only forward sold a huge percentage of their coming soybean crop but also of the second-crop corn that follows it.

As a result, second-crop corn area will likely grow by 13% to 27 million acres, forecasts Agroconsult, a local farm consultancy.

Farmer enthusiasm about second-crop corn is almost entirely derived from the dramatic devaluation of the Brazilian real, which as of Wednesday had fallen 33% against the dollar in 2015.

As a result, producers have forward sold second-crop corn, which will only be planted in February, for 16 to 18 Brazilian reals per 60-kilogram bag ($1.70 to $1.90 per bushel) along the BR-163 road in Mato Grosso, far in excess of the R$11 to R$12 per bag they were offered at the same stage last year, Marcos Rubin, an Agroconsult partner told a conference call Wedsnesday.

He estimates somewhere in the region of 30% of second-crop corn has already been committed

Also bolstering local prices are buoyant export premiums for next year, reflecting strong projected international demand, the analyst said. That's up to 20% higher than the forecast for this year, which is expected to be a record.

That would firmly establish Brazil as the No. 2 corn exporter.

In contrast to the second crop, summer corn planting is seen subsiding by 8% to 14 .3 million acres, simply because soybeans are more competitive and allow for a second crop.

Overall, Agroconsult sees Brazilian 2015-16 corn production rising 3.5% to 88.5 mmt. That's 50% higher than five years ago due to the surge in second-crop planting, which will nearly triple in the same period. The consultancy pegs next year's second-crop output up 10% at 60 mmt.

In the last two years, at this stage of the season, farmers were talking about reducing second-crop area by 15% to 20% but ended up planting the same acreage or more. This year, farmers aren't even going through that pretense, leading Rubin to speculate that area could rise even further than the 13% forecast.

The market for second-crop corn has matured over the last couple of years with seed supplies and marketing conducted in a much more orderly fashion, reducing the risk of planting.

Still, Brazilian farmers are currently more focused on planting soybeans. According to Agroconsult figures, some 14% of Brazilian soybean acreage had been planted as of Friday, slightly behind the five-year average of 20% amid dry weather in the Center-West. However, Rubin noted that it had rained over the last few days in northern Mato Grosso, one of the key dry regions, and fieldwork was moving forward quickly there.

"We don't see any reason to be concerned about late planting," said Rubin, noting fieldwork will likely move forward briskly over the next month as El Nino-induced rains return.

In line with USDA, Agroconsult forecasts soybean production will reach 100.6 mmt or 4.5% higher than the year before.

Brazilian farmers have sold over 40% of their soybean crop already, lured by excellent prices in reals.

While international quotes have slumped, Brazilian farmers are enjoying real-quoted prices that are 8% to 10% higher than last year on the devaluation.

This allows farmers to make money when Chicago futures sit at around $9 per bushel when U.S. farmers struggle, Rubin noted.

"Brazil can be very aggressive. It is now the price setter in the market," he said.

As a result, soybean exports will likely surge once again next year, reaching around 54 mmt or 69% higher than four years before.

(CZ)

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ALASTAIR STEWART
10/25/2015 | 3:05 PM CDT
Hi there, I've just seen this comment. You make some interesting points. Just to clarify,the 50% differential on corn is for delivery of second-crop from July 2016 onwards. Farmers will plant less summer corn in favor soybeans in 2015-16 for a number of reasons but most notably because soy margins are better the corn and, as you mention in your comment, it allows you to plant a second crop. The other factor is that corn costs more to plant than soy, which is important at a time when credit is tight. The question you pose about less expenditure on inputs is pertinent. Farmers will spend less on the soy crop this year and may also cut fertilizers for 2nd corn too, which could make the crop more susceptible to poor rainfall, as you say. Second-crop corn has proven to be less of a gamble than most thought, with no major crop failure seen for many years (if my memory serves). That in part is due to a better understanding of when to plant and the greater technology employed. That said, the second crop remains a risky crop and its growing importance to the export market could lead to growing volatility.
Freeport IL
10/22/2015 | 12:10 PM CDT
There are questions about two thoughts you have in this article. The quotes are "While international quotes have slumped, Brazilian farmers are enjoying real-quoted prices that are 8% to 10% higher than last year on the devaluation." and ". . . 16 to 18 Brazilian reals per 60-kilogram bag . . . far in excess of the R$11 to R$12 per bag they were offered at the same stage last year." The question is if soybeans are up 10% from last year and corn is up 50% (18/12 â?“ 1) why not more summer crop corn? We assume the answer is double cropped corn (winter corn) with soybeans is more profitable than mono cropped corn (summer corn). If this is true than will higher input cost from weaker Real result in less inputs used and maybe lower production on each unit? Brazilâ?™s total corn production, as noted in your article, is projected to be up 3.5%. That relatively small production increase, more reliance on the riskier winter crop corn and a changing weather pattern may being more volatility to the corn price. Freeport, IL PS The local basis sure seems to be moving away from the Brazilian farmer which could give Brazilian exporters room to push the price.