Corn Supply Hit

April 9, 2009 02:11 PM

Growing world corn stocks could have been even worse if Mother Nature had not stepped in. Reeling under the worst drought in at least 50 years, Argentina lost nearly 40% of its corn crop. Brazil's crop fell 10% to 15%.

"South America lost on the order of 550 million bushels of production potential since October planting," says Don Frahm of Informa Economics. "What we thought would be a 21.5 million metric ton [mmt] Argentine corn crop at planting now appears to be 13.5 mmt. It was hit by extremely poor, dry weather during its reproductive phase."

"Portions of [Argentina's] Buenos Aires and Entre Ríos provinces had a 50% rainfall deficit compared with 2007," says Francisco Pirovano of USDA's Foreign Agricultural Service (see map). "Because of heavy clay soils, which dry out rapidly, Entre Rios lost up to 90% of its 395,000 acres initially planted."

Two crops. Brazil has a much wider planting season than Argentina and produces two corn crops. The main summer crop, which likely will total 32 mmt to 33 mmt, won't be completely out of the field until July, keeping the market wondering.

"Although high input costs, lack of credit and low prices at planting played a role in the 3% decrease in plantings, the main reasons for an estimated 20% drop in the main crop were high temperatures and little rain from mid-November through December," says Julie Morin, U.S. ag attaché in Brazil.

However, "the first-crop difficulties may set the stage for a recovery in the safrinha or second crop, which is planted in February–March," she adds. "Safrinha production, about a third of the total corn crop, was expected to drop 30%. Now it may be down only 7% because domestic corn prices have improved while input prices have dropped."

Harvest of that crop is in August–October, says Bill McCary of Informa. "We are using 17.2 mmt as our estimate, but if yields equal last year it could be 1 mmt higher. If there's a July frost, it could be 5 mmt lower."

Supply/demand. USDA pegs the 2008/09 world crop at 787.1 mmt, down 5.9 mmt from last year, and expects world corn exports to plunge 25%. "Last year, tight wheat supplies increased demand for corn. Now, a large world wheat crop has increased competition and relegated corn to its normal role," says Brad Anderson of Informa. "At the same time, world economic problems are reducing demand and leading to smaller livestock herds in Asia, as well as in the U.S." (See "Outlook," page 32.)

Argentina typically exports about two-thirds of its crop—15 mmt last year. This year, it will do well to export half that amount, and will account for half the world's expected drop in exports.

Brazil stands to benefit, with USDA pegging its exports rising 2 mmt, to 9.5 mmt. "Brazil's export activity is limited, however, because soybeans take precedence," McCary says.

U.S. exports for the 2008 crop were pegged at just 43.2 mmt, down from almost 62 mmt last year.

"South American production losses are supportive," Anderson sums up. "But U.S. corn exports for the first half of the marketing year are nothing to brag about."

Looking ahead to 2009/10, "soybeans continue to be the less expensive and less risky crop in Argentina," Pirovano says. "Corn area will likely drop 12% and, assumingbetter yields, the crop may equal 14 mmt."

To contact Linda H. Smith, e-mail

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