The 2020/21 harvest approaches planting with expectations of a new record for Brazil

Agricultural Market Column, with Vlamir Brandalizze

The 2020/21 harvest is close to the start of planting, with optimism from the production sector. Soybeans had one of the best years in history, with occasional losses due to the weather and a harvest exceeding 120 million tons. It should break a record for planted area, with a projection of 38,5 million hectares, compared to 37,4 million hectares in the last harvest, with room to exceed 130 million tons. Corn from the first harvest should have a small reduction in area and remain close to five million hectares, with the potential to harvest 30 million tons. The off-season tends to see an increase in planting from February onwards, with the potential to reach something close to 15 million hectares and reach 80 million tons. Combined with other grains, Brazil is on track to break the historical record of 270 million tons. The world needs food and the country needs to get out of the crisis. Prices are favorable to Brazilian producers and everything conspires favorably for the sector to continue growing.      

CORN

The safrinha corn harvest is heading towards the final phase, with part of the harvest remaining to be harvested in Goiás, Mato Grosso do Sul and Paraná, in addition to the Southeast and part of the North. Approximately 70% of the harvest, estimated at just over 70 million tons, has already been negotiated and there is little left to supply the market until the summer harvest is harvested.

PROCESSING

Brazil has a good demand for soybeans, meal and oil in the second half of the year, and this year the picture will be very tight. In the first half of the year, more than 60% of the harvest had already been destined for export and by the end of July this volume was above 72%, leaving little to meet domestic demand. With less than 12 million tons to be traded (part of this volume will certainly still go to export), imports gained pace before the middle of the year and by the end of July there were already more than 240 thousand tons of imported soybeans. The volume for the year should exceed one million tons. With prices favoring producers who have also already negotiated a large part of the 2021 harvest, which has more than 35% of the expected 130 million tons negotiated so far. Ports broke record prices and closed above R$ 121,50 per bag at the best of times.          

RICE

The rice market this year surprised producers, with prices higher than expected by the sector. Levels of R$65,00 to R$75,00 per bag at the base of Casca do Rio Grande do Sul and levels above R$80,00 in the North and Central-West for 60-kilo rice close to industries. With these numbers, producers sold most of the harvest, and now less than 30% of the more than 11 million tons harvested are left to be traded. There is room for new increases, in a period in which normally there would still be more than 50% of the harvest left to be sold. The sector took the opportunity to negotiate and pay off old debts, at the same time as it prepares for a new and large harvest.   

SHORT AND GOOD

WHEAT

The wheat market remains favorable to producers, with strong prices and the expectation that from August onwards the new harvest will begin to arrive from Paraná and from October onwards the harvest from the rest of the South of the country. Then the market could retreat a little , but not much, because the imported grain will arrive in Brazil at more than R$ 1.200,00 per ton. The year will continue to be positive for producers, because there is strong demand and even with a larger harvest, close to 6,5 million tons, consumption tends to exceed 12 million tons. 

EUA

Producers had good conditions for the harvest until the end of July and so projections up to that point showed indications of a harvest greater than the projections of the United States Department of Agriculture (USDA). Estimated 113 million tons for soybeans and more than 386 million tons for corn. But the fundamentals are positive, because global demand will consume all and part of the stocks.   

CHINA

Even with the political and trade disputes, China has not stopped buying heavily from the USA, with the acquisition of millions of tons of American corn and soybeans in July. It should still buy heavily in August, because the country is suffering from a lack of grains. It had the lowest inventories in almost a decade, at the turn of the business year (February), and as a result, internal prices soared. Corn reached above 300 dollars per ton and soybeans surpassed the 500 dollars per ton mark. 

ARGENTINA

The Argentine harvest closed without any major changes, with soybeans just below 50 million tons and corn also at the same level. Exports advanced because there was a strong presence of China buying and taking a large part of the soybeans that were being negotiated, leaving the domestic market tight for the rest of the year.