Brazil’s B3 corn contract hits BRL101.4/bag high on supply fears
Fears over Brazil’s delayed safrinha corn crop and ongoing domestic demand have driven the May futures contract on the B3 domestic exchange to a new all-time high in as the contract raced to BRL101.4/bag ($304.36/mt).
The contract had passed through the BRL100/bag level earlier in the week but Friday's level represents a new high for the contract and comes after the contract settled at BRL99.86/bag on Thursday.
“There’s no offer for spot and now the market is concerned over the climate risk for safrinha,” one trade source said, part of a cocktail of fears that have led to stronger global corn prices.
Chicago corn futures jumped amid ongoing expectations of strong demand for US corn and smaller-than-expected planting.
Brazil’s corn outlook is sitting on a knife-edge as the country’s farmers are expected to have dedicated more area than ever before to corn.
But delays to planting mean there is mounting concern over the scale of potential yield damage that weather conditions could bring.
On Thursday, Conab issued its forecast for the second corn crop, planted on land cleared after the harvest of soybeans and from which the bulk of Brazil’s corn supply is derived.
The agency called for a 1.1% increase in the second corn crop planted area before predicting a 109 million mt total production figure, a 6.2% increase on last year’s production, and up 8.3% versus its forecast last month.
The safinha corn crop typically lands in late July but a delay to soybean planting has pushed all subsequent activity back, exposing the newly planted corn to less conducive weather and meaning the full flood of the new supply may not arrive until late August.
Meanwhile, May futures have continued to race higher after a disappointing first corn crop and amid ongoing demand for corn from the country’s domestic meat production industry and growing corn ethanol sector.
Figures from the USDA suggest that the volume of corn being used to make ethanol in Brazil doubled in 2020, despite the onset of heavy curbs on mobility as the country battled the Covid-19 pandemic.
Combining data from the corn-ethanol producer industry group UNEM and Brazil’s sugar lobby group UNICA, the USDA put corn consumed in the production of ethanol at 6 million mt, just under 6% of the country’s total production.
That compares with 3 million mt in the previous year, while the USDA reported that another seven corn-based ethanol production sites are either under planning, in development, or being constructed and could take domestic corn demand to 13 million mt.
The move came as corn prices globally were buoyed by expectations that the US will have to cut ending stock projections amid a strong export programme and against shock predictions of smaller than expected US planting area in 2021/22.
Updated to reflect new high of BRL101.4, versus BRL100.91/bag.