No room for error in South American corn production 

Early in 2024, many United States corn farmers are holding onto corn in the bins waiting and hoping for a price rally before making cash sales. 

The January U.S. Department of Agriculture report left a price wake of destruction after U.S. corn yield was increased, keeping carryout at a stubbornly large 2.1 billion bushel number despite an uptick in U.S. corn demand. Is there anything on the horizon that could inspire a price rally? Potentially yes, with the answer lying in South American corn production. 

Naomi Blohm. (Courtesy photo.)
Naomi Blohm. (Courtesy photo.)

What’s happened

A negative January USDA report, showing stubbornly large supplies of U.S. corn supplies has weighed on corn futures prices in early 2024. After all, 2.1 billion bushels of U.S. corn for U.S. carryout is a burdensome supply factor that may weigh on prices for the short term. What next? Will prices rally? If so, when? What is the next “marketing hope” that corn futures price have? 

Global corn production seems likely on the rise; however, many questions are beginning to surface regarding second crop corn production in Brazil, otherwise known as the Safrinha crop. The Safrinha second crop corn is planted in late February and early March right after the combines harvest soybeans in Brazil, with early corn harvest then in beginning in August. This Safrinha corn is the crop that many nations of the world rely on for import during the month of August, when the U.S. crop is not yet ready to be harvested. 

From a marketing perspective

The question is, can the Brazil corn crop afford to lose any production? Not really. And that matters to global corn production, global ending stocks, a potential increase in U.S corn export demand, and a potential price increase down the road, desperately hoped for by U.S. farmers. 

Over the past decade, Brazilian farmers have taken advantage of their growing seasons and weather and have discovered the benefit of double cropping corn behind soybean planting. Their ability to double crop has created a dramatic increase in their corn production. 

Back in 2011, Brazil corn production was near 75 million metric tons, but now thanks to double cropping corn, their production ballooned to 137million metric tons in the 2022-23 growing year. 

For the 2023-24 crop year, the USDA already has Brazilian production pegged at a slightly smaller number than the year prior, of 127 million metric tons. 

Now the next thing to remember is that Brazilian corn production currently has two primary growing cycles. Right now, growing in Brazil is first crop corn, which primarily consists of 25% of their total expected production. The USDA currently is estimating Brazil 2023-24 production to be 127 million metric tons that means only 32 mmt of corn is growing in their fields right now as “first crop” corn. That also means that the remaining 95 mmt of corn of expected Brazil corn production has not yet been planted. 

This “first crop corn” will be harvested in late February and March and primarily is kept in Brazil for their own domestic use. According to the USDA, Brazil domestic consumption is pegged at 77.5 mmt, with 63.5 of that slated for domestic feed. So that means, what is growing right now in Brazil will likely stay in the country for livestock feed, but then, some of that second crop corn needs to also stay in Brazil to meet further domestic demand as well. 

The USDA pegs Brazil exports (which is the bulk of their second crop corn) at 54 million metric tons. If Brazil exports 54 million metric tons, and they use 77.5 for domestic consumption, then total demand is slated for 131.50 million metric tons. 

And yet, according to the USDA, they are expected to only grow 127 million metric tons, down from the December USDA number of 129 mmt, which is also down from last year’s number of 137 million metric tons. 

Looking to Argentina, yes, we know the corn and soybean production has rebounded from the dramatically smaller crops last year due to drought. Last year, Argentina corn production was 34 mmt. This year, the USDA suggests that their production capabilities will improve to an astounding 55 mmt. But please note, all that corn is spoken for already in terms of demand. 14.1 mt will be used for domestic needs and 41 mmt will be used for exports, leaving combined demand at 55.1 mmt, using all their expected production. 

Prepare yourself

If there is a weather issue in Brazil for the Safrinha crop, the market may start to trade that news during the months of March or April. 

Regarding your marketing strategy, if you are choosing to sell corn in your bin sooner than later, perhaps consider a corn re-ownership strategy, just in case there is a weather flare up in Brazil in a few months. That would be the friendly fundamental news needed that would likely prompt the funds to exit their hefty, short positions. 

But also keep in mind, that holding out hope for a poor second corn crop in Brazil is not a great way to market your corn in your bin. What if they end up having “good enough” yields and sufficient production to meet that demand? Be ready for anything. 

If you have questions, you can reach Naomi at [email protected] or find her on twitter @naomiblohm. 

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Carefully consider whether such trading is suitable for you in light of your financial condition. Total Farm Marketing refers to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. SP Risk Services LLC is an insurance agency and an equal opportunity provider. A customer may have relationships with any of the three companies. 

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