Bumper corn crops in U.S., Brazil raise face-off prospects

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - TA­TIANA FRE­ITAS AND MEGAN DURISIN

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.

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