Brazil domestic corn prices surge as export pull depletes stock

Corn prices in the Brazilian domestic market are finding support as the crop reaches the end of its supply and uncertainty clouds expectations for the upcoming safrinha crop.

“Demand came and paid high premiums,” one market source said, with the buying coming at between a 95 cent and 115 cent premium to the CME’s underlying March CBOT corn futures contract.            

“Basically Iran, Cuba and Venezuela [all bought] and those levels made the co-ops sell,” the source continued.

Iran picked up Brazilian corn through the tail end of 2017 and into early 2018, with close to 750,000 mt making the move, although some market sources expect the volume to be even higher.

At the premiums quoted, the outright price paid for the corn amounts to $182.50-$190.50/mt, although those underlying contract prices have been rising since mid-January.

Domestic corn prices for Brazilian yellow corn have been on the rise in recent weeks, hitting BRL 34.22 for a 60 kg bag on February 19, according to the agriculture research unit CEPEA, equating to approximately $187.50/mt on an FOB basis.

That’s up from BRL 31.89 on January 25.

Iran has not been alone in its buying, however, with data showing Brazil’s exports to the EU have risen nearly five-fold in the current marketing year.

Brazilian corn now accounts for almost half of the EU's total imports, with 4.91 million mt imported since July 2017, EU data from early February shows.

Brazil saw a massive harvest in 2016/17, which catapulted it from fourth to the second largest corn exporter globally, surpassing Argentina and Ukraine by some margin as 34 million mt came available for export, according to the USDA.

With Brazil’s first corn crop currently in the ground, and some concerns swirling around its second safrinha corn crop – the harvest that typically powers Brazil’s exports – the expectation is that Brazil will remain a substantial exporter of corn.

The USDA is currently forecasting 35 million mt of exports from a maximum crop of 95 million mt.

However, with harvests overrunning and dry weather affecting the south of the country, many other analysts have lowered their expectations for Brazil’s corn and soy harvest to levels closer to 88 million mt.

Those concerns, along with fears for the health of the Argentine corn crop, are feeding into a firmer tone on the Board, with corn prices in Chicago up more than 6 from a January low.