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Understanding the Brazil corn crop

Even if the mere idea of visiting Brazil has never crossed your mind, you probably have listened to a song called “The Girl From Ipanema”, maybe in Frank Sinatra’s voice. And what does that song have to do with agricultural markets?

Nothing. But one of its composers, Brazilian Tom Jobim (who sings the song with Sinatra), once said that Brazil is not for beginners. That sentence became a famous and useful way to describe how difficult it is to understand Brazil’s peculiarities. And its corn market is one of them.

As you probably know, Brazil grows two corn crops a year. Well, since last October, it is officially three, but I will write about that third crop another time. For now, let’s stick to the two traditional crops. The first one is planted from September to December and competes for area with soybeans.

Considering that Brazil is now a soybean powerhouse, it is not a surprise that the first corn crop has lost millions of acres over the last two decades. Twenty years ago, the first crop was grown in 24 million acres and represented 88% of Brazil’s total corn production; now, it’s only 10 million acres and 26%.

The first corn crop still has higher yields than the second, but now it is focused on the domestic market and planted only in regions where weather conditions prevent farmers from growing corn as a second crop, which is sown in January and February, right after the soybean harvest. You probably know it as “safrinha,” Portuguese for “little crop.”

That “little crop” represents now more than 70% of Brazil’s total corn production and makes up the bulk of Brazilian corn exports. This second crop is the result of many years of investment in research and development of better seed varieties and agronomic practices.

It is also the result of having weather conditions that allow a second crop after the soybean harvest. It is equally an outcome of the courage of farmers who are brave enough to grow corn in places like Mato Grosso, a state located 1,300 miles from the main ports and linked to them by terrible roads.

And last but not least, it is the result of a bit of luck as well. Yes, luck. In 2019, for example, Brazil harvested its largest corn production ever, hitting the 100 million metric tons figure for the first time. And that on top of its highest beginning stocks on record. But this year luck has knocked on Brazil’s corn door at least twice.

The first stroke of luck was (and has been) a weakening currency against the dollar, which makes corn prices in Brazilian reais much more interesting for farmers. The second one was the complicated planting season in the United States. The prospect of a crop failure made American farmers hold on to their corn and sent importers to other exporting countries.

From January to October 2019, Brazil exported 34.7 million metric tons of corn. That is more than it has ever shipped in an entire year, easily beating the previous record — the 29.2 million metric tons exported in 2017 — two months before the end of 2019.

Even with quite a bit of corn yet to be sold, Brazilian corn prices have kept rising amid a dispute between domestic buyers, who need corn to feed a thriving meat industry, and exporters, who are still trying to complete their 2019 programs. Common sense would say that Brazil could never be a big player in the global corn market. But, as explained before, understanding Brazil is not for beginners.

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