By Jon Scheve, Superior Feed Ingredients, LLC
Global demand is focused 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 uncertain and ever changing because it is heavily influenced by U.S. and South American weather, which is highly unpredictable.
With so much uncertainty in so many areas of the world, the market will continue to be volatile until U.S. crop production estimates become clearer by August.
South American corn production
There are many different corn crops grown in South America. The earliest planted is the Brazil’s first season corn crop which is planted from early September to mid-November. Argentina also grows a corn crop at nearly the same time with most of it planted in October. Brazil’s second and largest corn crop is planted in February and early March. In the last couple of years there has even been a third Brazilian crop being planted in the north eastern portion of the country which is planted at nearly the same time as the U.S. corn crop.
Brazil’s second crop now gets the most attention because it’s 10% bigger than Brazil’s first and third crop and Argentina’s total corn crop combined. At 75% of total Brazilian production, the second crop produces 80 MMT (million metric tons) or just over 3 billion bushels, which is like the total production of Illinois and Indiana combined.
About half of Brazil’s second corn crop is grown in Mato Grosso and the other half is the southern region around Parana. The chart below shows the average rainfall in both regions by month.
The chart shows that in the Parana region it rains about 1 inch every 4 days consistently 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.
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
The U.S. is the undisputed king of corn because our national yield average dwarfs all competition.
- While Brazil produces the same amount of corn as Illinois and Indiana with just their second crop, it requires more than twice the land to do it. Brazil’s national yield average has been around 85 bushels per acre for both the first and second crops.
- Argentina produces half as much corn as Brazil and has similar total production as Nebraska. Argentina yields generally average 110 bushels per acre; however, with La Nina this year it could come in slightly below 100 bushels per acre.
Despite lower yields total Brazilian exports are similar to the U.S.
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 world corn produced, 187 MMT which is about 7 billion bushels or half the size of the total US production, is traded between countries around the world. As of the latest USDA report it’s forecasted that the U.S. will supply 2.6 billion bushels of it, or just over 35% of the total. 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.
The constant expansion of Brazil’s corn crops is becoming a much more important factor in the prices that we see here in the U.S.
Please email email@example.com with any questions or to learn more. Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.
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