Brazil’s huge crops strain logistics as corn collapse gives soybeans the edge

Corn prices down as ports struggle with shipments

Brazil’s corn export window is highly likely to crash into the later-running soybean export window in the second half of the year, market sources have told Fastmarkets Agriculture, while logistic struggles, higher supply and poor demand add additional pressure on basis.

The country’s bumper soybean crop – estimated at 154 million tonnes by the USDA – was said to have created many logistics problems that range from a lack of storage to shipment delays and have resulted in a sharp drop in premiums as exporters try and attract demand in June, July and August.

Those months are the key months for corn exports, as they usually mark the point when the lure of the corn export program overcomes soybean competitiveness as harvesting of the second corn crop, known as the safrinha, picks up steam through June.

But market sources have warned that the typical transition may not happen as smoothly this year, and an overlap of both export programs is highly possible, creating headaches for ports and logistics.

“Probably, the soybean (export) program will push the corn program one month later,” Eduardo Vanin, market analyst at Agrinvest, told Fastmarkets, with other local market sources sounding similar warnings.

We have already warned our logistic clients to organize themselves for the second semester, as it will not be possible to simply switch from soybean to corn on the traditional ‘turning point’ time of the year.

Daniele Siqueira of Parana-based Agrural

“The fear is that we have something similar to what has been happening with soybeans if we have a bumper safrinha crop. There will still be a lot of soybeans to flow in the second semester when safrinha comes in.”, Siqueira declared.

Players are expecting a strong safrinha crop as the Brazilian national food agency Conab estimates 95.3 million tonnes of corn to be harvested this season, a number that raises concerns of further stress on a logistics chain that has struggled to absorb the country’s huge soybean crop.

“With no doubts, we will have a (corn) scenario really close to that of soybean’s regarding storage and logistics,” said Vinícius Alves, a broker with the company Agriasset.

Size matters

Early signs from Brazil’s agricultural powerhouse, the state of Mato Grosso, suggests that the crop is performing well, with local government agency IMEA expecting the harvest to deliver 46.4 million tonnes of corn – nearly half the entire safrinha.

“We’re hearing that many are expecting a record crop this year, while there are farmers’ cooperatives buying silo bags and other players stating they will have to store their corn outdoors.”, a trading source told us.

On the other hand, Siqueira also warned that many areas were sown outside the ideal window, elevating weather risks and pinning a lot of hope on sufficient rain and a lack of frosts as the winter approaches.

Demand

However, supply is only one side of the coin, and when it comes to demand, the lack of any strong pull is also catching the market’s attention, especially after many Brazilian enterprises signed the protocols required for them to export corn to China back in late 2022.

That had raised hopes of a strong new outlet for Brazilian corn exports, but according to one market source, their brokers had been showing offers to Chinese customers on a daily basis but with no success so far.

Meanwhile, Vanin of Agrinvest noted that only a relatively small portion of the crop had been sold in advance.

Melting prices

“Prices are melting (…) buyers are waiting for corn prices to fall a lot before buying some volumes,” Siqueira said, with some forward months already dipping into negative territory and prompt premiums collapsing.

“We will have corn in July and August [and face] the same problems we are having in the soybean now, a lot of product to a few demand,” Granopar’s analyst Aldo Lobo told us.

“This negative basis also is related to logistics, and there will be players during the harvest, selling corn due to logistic struggles,” Lobo said.

The moves appear to be working, with the plunge in Brazilian cash basis attracting attention from buyers, as the USDA reported the cancelation of 327,000 tonnes of US corn sales to China – a move that has sent shock waves through the North American complex.

That stoked thoughts from market analysts that Chinese buyers are preparing to switch their buying to Brazil.

“It is possible that they (China) are feeling more confident in the Brazilian crop and are now looking to exit some of the purchases they have on the books with the US,” Ted Seifried of US-based Zaner Ag Hedge said.

“It’s difficult to ignore the sharp collapse in Brazilian soybean basis and now watching Brazil corn basis trending lower, [it’s hard] not to feel there is additional corn basis weakness coming,” Kelly Herrick, another US-based analyst of Advance Trading, told Fastmarkets Agriculture.

“At the very least, it probably puts a halt to discussion of any additional US corn sales to China,” Herrick said.

On Tuesday, April 25, Brazilian Santos FOB market for July shipment was assessed at 25 cents per bushel under July CME future, a sharp drop from a week ago, when it was assessed at 20 cents per bushel over the same future.

For more information on the current corn market, take a look at our dedicated page for corn market insights.

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