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Market Commentary for 3/12/21
Global demand is focusing on China’s upcoming needs, which are largely unknown. The market is watching to see if they will buy more, cancel purchases, or delay shipments to next season.
Supply is also unclear and constantly changing because it is heavily influenced by the unpredictability of US and South American weather.
With so much international uncertainty, the market will continue to be volatile until US crop production estimates become clearer in August.
South American Corn Production
There are several corn crops grown in South America. The earliest is Brazil’s first season, which is planted between early September and mid-November. Argentina also produces a corn crop during this time. Brazil’s second and largest corn crop is planted between February and early March. Also, in the last few years northeastern Brazil has been planting a third crop with a similar growing season as the US.
Brazil’s second crop gets the most attention because it’s 10% bigger than all other Brazil and Argentina corn crops combined. It represents 75% of all Brazilian production and produces 80 MMT (million metric tons) or just over 3 billion bushels. For perspective, this is like the total production of Illinois and Indiana combined.
Precipitation Variances
About half of Brazil’s second corn crop is grown in Mato Grosso and the other half is produced in the southern region of Parana. The chart below shows the average rainfall in both regions by month.
As you can see, the Parana region consistently rains about 1 inch every 4 days throughout the growing season. Mato Grosso, on the other hand, shows average rainfall drops significantly in May as the corn is pollinating and maturing. That means if planting dates are pushed back into late March, late May dry conditions can negatively impact yields on 50% of Brazil’s second corn crop. If this happens, the market can rally.
Brazil’s Planting Pace Delays
There have been planting delays in Mato Grosso this year, indicated by the red line in the chart below. It’s the slowest planting pace in the last 5 years (green shaded area).
This doesn’t necessarily mean there will be a yield reduction this year, only that there is an increased possibility based upon historical rain patterns.
Corn Yield Comparisons – South America vs US
The US is the undisputed king of corn because our national yield average dwarfs all competition.
- While Brazil’s second crop produces the same amount of corn as Illinois and Indiana, it requires more than twice the land to do it. Brazil’s national yield averages around 85 bushels per acre.
- Argentina produces half as much corn as Brazil and has similar total production as Nebraska. Yields there generally average 110 bushels per acre; however, with La Nina this year it could come in slightly below 100 bu/acre.
Despite Lower Yields Total Brazilian Exports Are Similar To the US
While the total corn production of Brazil and Argentina is only 13% of all corn produced worldwide, they are still major players globally in corn exports. USDA reports indicate only 17% of all corn produced worldwide is traded between countries. This represents 187 MMT (7 billion bushels), or half the size of all US corn production. The latest USDA report forecasted that the US is expected to supply 2.6 billion bushels of all corn exports, or just over 35%. Brazil will likely also export 2.6 billion bushels or more, mostly from their second crop. That’s why planting pace in March and May weather in Mato Grosso will be critical to global corn markets.
Brazil’s continued expansion of corn production will become a bigger and bigger factor on US corn prices going forward.
Want to read more by Jon Scheve? Check out recent articles:
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Jon Scheve
Superior Feed Ingredients, LLC
jon@superiorfeed.com
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