The world's biggest corn exporters are preparing for a showdown.
Brazilian farmers are in the midst of collecting their biggest corn harvest ever, and American supplies are also plentiful -- setting the stage for a stiff battle to win world buyers in the second half of the year.
It's a turnaround from just a year ago when U.S. exporters were seeing sales boom as a drought plagued Brazil's fields. This year, the South American growers had much better weather, and crop supplies have gotten so big that farmers are already short on storage after collecting a large soybean harvest just a few months earlier. That's giving exporters incentive to push corn shipments out quickly and could mean a squeeze for hedge funds that are betting on a price rally.
"Buyers rule in the global corn market this season," Pedro Dejneka, a partner at Chicago-based MD Commodities, said in telephone interview. "Competition between the two major exporters will be tough."
Japan and Mexico are expected to be the biggest corn importers this season, according to the U.S. Department of Agriculture.
December corn futures on the Chicago Board of Trade fell 1.8 percent in July to about $3.85 a bushel in New York. The ample supplies and shifting U.S. weather patterns dragged prices lower.
Officials at the University of Arkansas System Division of Agriculture estimate that Arkansas farmers planted 680,000 acres of corn this year, down from 760,000 acres in 2016.
Brazil's corn production in the 2016-17 season is forecast to surge 45 percent from a year ago to a record 106 million tons, according to the USDA. The agency estimates that the 2016 U.S. harvest reached an all-time high and that the crop gathered this fall will be the second-bigger ever. The USDA will make its first survey-based estimates of U.S. production later this month.
Competition has grown for farmers in the U.S., the world's biggest grower and exporter. Brazil, which barely shipped any corn just two decades ago, has since emerged as a significant competitor. Sales are also on the rise from Argentina, which reaped a record harvest this season.
Brazil's shipments normally climb at this time of year, the heart of the country's winter harvest, and its expected exports are the highest ever, according to vessel line-up figures through 2013. U.S. growers will collect their next crop between September and November.
A storage crunch is adding pressure for the market to move grain quickly as the corn harvest advances. The bumper corn harvest has driven domestic prices to the lowest in two years, making supplies attractive to importers.
Meanwhile, U.S. corn shippers are seeing slow bookings for the coming marketing year, which starts in September. The 4 million tons of new-crop outstanding sales as of July 20 were 44 percent below last year and the lowest for the date since 2010, USDA data show.
"U.S. exports probably will continue to flag lower, while South America's continue to push higher," Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. "It's going to be a real fight."
The U.S. is expected to remain the world's top corn supplier despite Brazil's surge in production.
The South American country's success in grabbing market share partly depends on moves for the Brazilian real and how many farmers are willing to sell crops at low local prices, said Paulo Molinari, an analyst at Safras & Mercado consulting firm.
The size of the 2017 U.S. corn harvest also remains a key factor to determine the room Brazil can occupy in global trade. Fields are in the midst of the critical pollination phase and won't be harvested for several more months.
"When we get into the fall and beyond, when 2017-18 corn supply is fully discounted, we'll be looking more intently and trading more decisively off of the demand side of the equation," said Richard Feltes, head of market insights at Chicago-based R.J. O'Brien & Associates.
Information for this article was contributed by Stephen Steed of the Arkansas Democrat-Gazette.
Business on 08/01/2017