Brazilian farmers have not only forward sold a huge percentage of their coming soybean crop but also a large portion of the second-crop corn that follows it.
As a result, second-crop corn area will likely grow by 13% to 27 million acres, forecasts Agroconsult, a local farm consultancy.
Farmer enthusiasm about second-crop corn is almost entirely derived from the dramatic devaluation of the Brazilian real, which as of Oct. 21 had fallen 33% against the U.S. dollar for the year.
As a result, producers have forward sold second-crop corn, which will be planted in February, for 16 to 18 Brazilian reals per 60-kilogram bag ($1.70 to $1.90 per bushel) along the BR-163 road in Mato Grosso, far in excess of the R$11 to R$12 per bag they were offered at the same stage last year, Marcos Rubin, an Agroconsult partner, told a conference call Wednesday.
He estimated somewhere in the region of 30% of second-crop corn has already been committed
Also bolstering local prices are buoyant export premiums for next year, reflecting strong projected international demand, the analyst said. That’s up to 20% higher than the forecast for this year, which is expected to be a record.
That would firmly establish Brazil as the No. 2 corn exporter.
In contrast to the second crop, summer corn planting is seen subsiding by 8% to 14.3 million acres, simply because soybeans are more competitive and allow for a second crop.
Overall, Agroconsult sees Brazilian 2015-16 corn production rising 3.5% to 88.5 million metric tons. That’s 50% higher than five years ago due to the surge in second-crop planting, which will nearly triple in the same period. The consultancy pegs next year’s second-crop output up 10% at 60 mmt.
In the last two years, at this stage of the season, farmers were talking about reducing second-crop area by 15% to 20% but ended up planting the same acreage or more. This year, farmers aren’t even going through that pretense, leading Rubin to speculate that area could rise even further than the 13% forecast.
The market for second-crop corn has matured over the last couple of years with seed supplies and marketing conducted in a much more orderly fashion, reducing the risk of planting.
Still, Brazilian farmers are currently more focused on planting soybeans. According to Agroconsult, some 14% of Brazilian soybean acreage had been planted as of Friday, slightly behind the five-year average of 20%, amid dry weather in the Center-West. However, Rubin noted that it had rained over the last few days in northern Mato Grosso, one of the key dry regions, and fieldwork was moving forward quickly there.
“We don’t see any reason to be concerned about late planting,” said Rubin, noting fieldwork will likely move forward briskly over the next month as El Nino-induced rains return.
In line with USDA, Agroconsult forecasts soybean production will reach 100.6 mmt, or 4.5% higher than the year before.
Brazilian farmers have sold over 40% of their soybean crop already, lured by excellent prices in reals.
While international quotes have slumped, Brazilian farmers are enjoying real-quoted prices that are 8% to 10% higher than last year on the devaluation.
This allows Brazilian farmers to make money when Chicago futures sit at around $9 per bushel, Rubin noted.
“Brazil can be very aggressive. It is now the price setter in the market,” he said.
As a result, soybean exports will likely surge once again next year, reaching around 54 mmt, or 69% higher than four years before.