Conab resists boost to Brazil crops despite rain expectations

Brazil’s Conab has boosted its soybean crop estimate by 1.5 million mt and trimmed its corn production estimate to 87.3 million mt in its monthly update, disappointing analysts who had been expecting an increase in corn and a bigger rise in soybean.

The monthly report said the positive impact of rains on the Brazilian crop had been overestimated by market analysts who were anticipating a yield at 3.27 kg/ha, and had anticipated a 2.5 million mt increase in production to push the expected crop just above last year’s record production level of 114.08 million mt.

However, Conab expects an average yield of 3.23 kg/ha, an increase on last month’s report, but still below last year's 3.36 kg/ha.

Soy acreage, however, has been booming and is set to hit an all-time high of 35.05 million hectares, beating market expectations, as the “better profitability in relation to other crops means that producers feel encouraged to continue to bet on this culture,” Conab said.

That ensured that Brazil is on course to hit 113.02 million mt in the 2017/18 harvest.

Fall in corn production

Corn production was trimmed by over 700,000 mt however, to stand at 87.30 million mt, in a move that fell short of market expectations, with analysts braced for production of 89 million mt, as corn area lost ground to soybeans.

The country's first crop, currently underway, saw increased yields push production higher but a significant reduction to the second crop left the overall crop production expectation lower.

Conab cut 1.1 million mt out of the second crop, now pegged at 62.16 million mt, while planted area was cut even further to be set at 11.39 million mt, down 6% on the year.

The first crop saw gain in yields, thanks to the good weather, but acreage remains low at just under 5 million hectares, 8.9% less than the previous harvest and the lowest area sown in the first crop since 1976/77.

Acreage for the first crop has been on a continuous decline over the last few years, as farmers opt to plant the more profitable soy and then focus on corn as a second crop.

The move puts two of Brazil's big agriculture agencies at odds with each other, as Agrural recently pushed up its corn crop expectations by around 1 million mt to 89.9 million mt, on the back of conducive corn growing weather and high domestic prices encouraging farmers to prolong their corn planting.