Hedgepoint updates 23-24 soybean harvests to 146M mt and corn to 117,1M mt

The last few weeks have been extremely relevant for the Brazilian soybean and corn harvests. In the first, the floods in Rio Grande do Sul continue to impact harvesting work and bring uncertainty about the state's production, while in corn the main uncertainty lies in the impact of low soil humidity in the Center-West. Hedgepoint Global Markets addresses, in a report, how these developments impact production estimates.

Soy: Impact of floods should be greater than estimated by Conab

In soybeans, the harvest was practically completed in most states, with the exception of Rio Grande do Sul – and this is where the big difference between our estimate and Conab's is.

In its latest harvest update report – released on May 14 – the agency made a cut of around 0,4M mt in the RS production estimate, which represents a cut of less than 3% on the estimate of almost 22M mt to the state in April.

“However, we understand that the impacts of the floods will be much greater than currently predicted by Conab. According to Emater/RS, there was a drastic reduction in the quality of the grains compared to the product obtained before the excess rain. It is estimated that the harvested area reached 85%. Furthermore, the advance will probably be insignificant in the coming days, since many crops, of the remaining 15%, must be abandoned due to economic unfeasibility, that is, the harvest from these areas does not cover the costs of the operation, freight and discounts applied upon receipt by cereal producers”, explains Alef Dias, Grains and Macroeconomics analyst at Hedgepoint.

According to Alef, “given these impacts, we estimate a harvest of 18,2M mt for the state, a reduction that is somewhat softened by positive adjustments in the Central-West, as data from local agencies point to results above those estimated in last months".

“As a result, our estimate is for a harvest of 146M tonnes of soybeans in Brazil in the 23/24 cycle, 4,1M tonnes lower than our previous reading”, highlights the analyst.

Corn: climate in the Midwest deserves attention, but Conab seems excessively pessimistic

In corn, the market's focus is on the final stages of the winter harvest, which is expected to begin harvesting in the coming weeks.

“Since our last harvest update, several regions in the Center-West have received below-average rainfall, keeping soil moisture at the lowest levels of the last 5 years and only some regions in MT have favorable harvest conditions, according to Conab”, notes .

“Although these conditions are far from ideal, we understand that Conab's estimate is extremely pessimistic for the region, especially in MT and MS. Local agencies point out that planting within the ideal window should lead to better yields than those estimated by Conab, even if lower than those of the last harvest”, he ponders.

“As a result, we estimate Brazil’s total corn production at 117,1M mt in the 23/24 harvest, 2M mt lower than our previous reading, but 5,5M mt above Conab’s estimate”, he points out.

However, it is important to mention that the weather in the coming days is expected to remain extremely dry in all main regions, so additional cuts – even if smaller – should not be ruled out.

In summary, despite the market's focus increasingly on American crops, Brazilian numbers may still have relevant impacts on soybean and corn prices, mainly due to discrepancies between USDA and Conab estimates.

“In soybeans, our number of 146M mt is 4,1M mt lower than our previous reading and 1,7M mt lower than Conab’s. In corn, we see a harvest of 117,1M mt, 2M mt lower than our previous reading but 5,5M mt above Conab's estimate”, he concludes.