The sight of cash offers in Brazil’s FOB Santos hub reaching premiums of 200 cents over the December contract was the starkest sign yet that the country - nominally still at the height of its export season - is running out of stocks.
With Brazil reported to be virtually sold out of export supply from this year’s safrinha, and Argentinian exporters pulling offers for the new crop from March amid planting and currency problems, some in the market anticipate exportable South American supplies to dry up for shipments over the next six months.
Add into the mix limited FOB offers from US hubs and soaring premiums in the Black Sea on crop fears, world seaborne corn supply is looking tight well into the second quarter of next year.
Many in the market expect this situation to last, unless prices rise significantly.
“Brazil is tight but not sold out. But Argentinian farmers are not selling anywhere. I guess that Chicago futures must go to five dollars and selling will come,” an Argentina-based trader told Agricensus.
Chicago futures are currently trading at just over $4.06/bu and $4.09/bu for the December and March contracts respectively, having last traded at the $5/bu mark back in July 2013.
In the port of Santos, cash premium offers for December jumped to 200 c/bu over the December contract late Thursday, up 30 c/bu from the offers heard earlier in the session, as futures on the domestic B3 exchange tested new highs.
After setting a series of new records, the January contract reached BRL73 per 60 kg sack on Thursday, up more than 1% on the day following weeks of continuous rises.
Meanwhile, in FOB Santos a 200 c/bu premium equates to a flat price of more than $237.50/mt, a chunky $17.50/mt above Thursday’s APM-14 assessment and roughly on par with trades heard for delivered cargoes into South Korea barely ten days ago.
“Indeed it’s almost done for 2020 crop... I can´t guess how many cargos are still available to sell, but not many surely,” a Brazil-based broker said.
Furthermore, planting both for the first corn crop – which is usually reserved for domestic consumption – is behind the five-year average with progress on the first soybean crop at a decade low.
Both factors could affect the more export-heavy safrinha crop from July next year, with traders eyeing progress closely as global corn prices push higher.
“I think the soybean delay has more to do with [the rise in corn prices] because it means we’ll have a more complicated second crop, which will be planted and harvested later,” Danielle Siqueira from Curitiba-based consultancy Agrural told Agricensus.
“Farmers have been planting like crazy since yesterday, because several areas have had rains that were not exactly forecasted. But weather conditions are not normal yet,” Siqueira said.
But with limited offers for the remainder of 2020 and no offers posted late yesterday or Friday for the new crop from March in Argentina, supplies from South America could falter for most of the first half of next year.
For the old crop in November and December, final offers were heard at 155 c/bu for December, up 10 c/bu on the day.
But all offers for March onwards were pulled by exporters, amid reports farmers simply aren’t selling, further pushing up replacement costs which were already priced in well above export values after factoring in export taxes and other costs.