Brazilian Corn Industry Set to Recover in the 2021/22 season Despite Complications

Brazil has been a top producer and exporter of corn for many years, and the industry keeps growing with two corn harvests every season. The first corn harvest in Brazil is planted from September to November and harvested from February to June, producing 33% of the annual corn production. The second harvest is planted from January to December and harvested from June to September, supplying 67% of the national corn output annually.

In the 2019/20 Brazilian corn season, production reached 102M tons due to a 6% increase in the planted area. In the 2020/21 season, the crop output decreased to 87M tons due to unfavorable weather and the worst drought reported in nearly a century. For the 2021/22 season, the harvest area for corn increased by 8.1% YoY. Forecasts indicate that corn production will increase by 33.3% and reach 116M tons this season, but the current weather, including floods and rains, may affect the output.

Source: MercoPress, USDA

Mato Grosso is the largest producing state for corn in Brazil. This year, Mato Grosso completed 90% of the harvest by February, which is sooner than usual, but until May 20, only 1.2% of the first harvest was complete. The production estimate for the 2021/22 season in Mato Grosso decreased from 43.37M tons to 43.16M tons due to insufficient rain since April. The current estimate represents a 20.3% increase from the 2020/21 season when the state produced 35.89M tons of corn. Although predictions indicate corn production will be higher this year, the yield is forecasted to decrease from 109.02 bags/ha to 102.10 bags/ha (60kg bags). Paraná is also a high-producing state for corn, where this season 99% of the first crop harvest was completed until May 23. In Paraná, the second crop is expected to reach a record volume of 16M tons this 2021/22 season. The third-largest producing state Rio Grande do Sul has faced high rains this season but completed 90% of the first harvest by May 26.

The Brazilian corn industry is facing some challenges, including the increase in the price of petroleum and gasoline that has increased both production and freight costs. The Russia/Ukraine conflict has also affected Brazilian corn due to the increased fertilizer costs due to lower supply. Brazil imports about 20% of its fertilizers from Russia, and since the war started, the fertilizer price in Brazil surged by over 100%, affecting the wholesale prices of fruits and vegetables. On the other hand, the Russia-Ukraine war has also positively impacted the demand for Brazilian corn since Ukraine is the fourth largest corn exporter. The drop in supply from Ukraine and export difficulties have boosted the price of corn internationally, benefiting Brazilian corn producers and exporters.

Despite complications within the industry, the high production forecast for Brazilian corn has buyers speculating on lower prices and decreasing their current orders. During May, buyers dropped their order volumes and requested lower prices from producers, affecting current exports. Most of the Brazilian corn from the second crop is expected to be traded through pre-negotiated contracts and not sold on the spot market, so buyers are currently negotiating for future months. The high production volume and demand will allow exports to increase and recover this season since exports in the 2020/21 season dropped by 40% to 35.4M tons. The USDA predicts that Brazilian corn exports will recover in the 2021/22 season and reach an export volume of 44.5M tons.