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Due to the worsening of weather conditions in January, with dry weather in South America, hEDGEpoint Global Markets announced this week additional cuts in projections for the 2021/2022 soybean and corn harvests. Analysts reduced the estimate for oilseeds by 3.8%, to 133.3 million tons, and for cereals by 0,9%, to 112,9 Mt, in relation to the previous forecast. In December, before the deterioration of harvest conditions in the south of the country, soybean production had already been reduced by 7,6%.
“With this considerable reduction in supply, especially in soybeans, demand also has to be adjusted. However, the fundamentals point to a smaller reduction than the supply, leading us to estimate tighter final stocks for commodities”, comments analyst Alef Dias. In the season, compared to 20/21, carryover stocks should vary from 4,9 Mmt to 3,4 Mmt (soybeans) and from 8,8 Mmt to 11,3 Mmt (corn), according to hEDGEpoint.
Dias highlights that, on the demand side, the scenario is more favorable for grain exports due to a recovery in Chinese demand and the still favorable exchange rate. In the domestic market, the scenario points to less heated demand due to lower meat exports and cuts in the biodiesel mandate (mandatory mixture with diesel).
“For external demand, the estimates remain similar from the point of view of the Chinese meat market. Another relevant point is the exchange rate issue. Despite the appreciation of the real in 2022, due to the monetary policy adopted by the Central Bank (BC), the exchange rate is still at levels favorable to the competitiveness of Brazilian products”, says the analyst. According to him, crop failures in Argentina and Paraguay should also represent another incentive for Brazilian producers to export.
Regarding supply, hEDGEpoint draws attention to the deterioration of climate conditions, especially in the South region. “Precipitation forecasts remain challenging, which could lead to further revisions towards a tighter balance”, says Dias . On December 21, the percentages of areas with good and bad conditions in Paraná were 57% and 13%, already below the average of the last 5 years. In the latest report from the state Department of Agriculture, dated January 31, these percentages were, respectively, 36% and 31%.
“With this additional deterioration, which also occurred in RS, our models pointed to yet another cut in our estimates”, points out the expert. “In corn, the situation remains less worrying, given that current conditions only impact the summer harvest, leading us to estimate higher ending stocks than in the last harvest”, he adds.
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