Corn prices remain firm as global supply tightens

Corn prices remain stable on the international market. Lower production in the United States and Argentina, combined with increased global demand, is putting pressure on stocks and keeping prices high. In Brazil, the second harvest and the increased use of the grain for ethanol are determining factors for price behavior in the short term. This information is included in Radar Agro, a publication by Itaú BBA,

The 2024/25 harvest presents a scenario of reduced global stocks. The United States Department of Agriculture (USDA) estimates a drop of 25 million tons, taking the global stock-to-consumption ratio to its lowest level since 2013/14. US production will be 378 million tons, down from 390 million in the previous harvest. Despite this, US exports remain strong, with a projection of 62,2 million tons.

In Argentina, the third largest exporter, production was affected by weather problems. The USDA revised its initial projection from 51 to 50 million tons, but analysts estimate a harvest of around 45 million tons. The lack of rain and high temperatures have damaged crops planted between September and October. As a result, Argentine supply may be even lower, worsening the squeeze on global stocks.

In Brazil, analysts at the bank point out that the expectation is for a larger harvest, but domestic consumption continues to grow. Demand for ethanol production is expected to increase by 20% compared to the previous cycle, totaling 21,1 million tons. The trend is for domestic stocks to reduce, given that consumption is projected at 88 million tons, 5% above the last harvest.

The second harvest will be decisive for domestic market prices. In Mato Grosso, which accounts for almost 50% of the “safrinha” corn production, planting was concentrated in a few weeks, increasing attention to the weather in the months of April and May. In Paraná, planting reached 56% of the projected area, favored by soil moisture. The expectation is for a slight increase in the corn area in the state, while the wheat area may be reduced.

The climate transition from El Niño to La Niña creates uncertainty about the volume of rainfall for the second harvest. Weather models differ on the forecast for April, a critical month for crop development. In addition, the risk of early polar air masses may impact production in regions such as Mato Grosso do Sul, São Paulo and Paraná.

In the short term, says Itaú BBA, domestic prices should remain high. The appreciation reflects not only the global scenario, but also the hesitation of producers to sell the grain, the shortage of trucks due to the record soybean harvest and the increase in freight. The price curve on B3 has an inverted shape, indicating future prices lower than current ones, reinforcing the importance of the second harvest for market behavior in the second half of the year.

External factors may influence prices throughout the year. The USDA will release its US planting intentions report in March, which may indicate an increase in the country's corn area. In addition, a possible resolution of the Black Sea conflict could ease global supply and impact prices.