Greater productivity and smaller presence of China adjust world stocks – 06/19/2023 – Vaivém

Corn producers from Paraná experienced a week of tension in several areas of the state due to the intense cold. The expectation remains in the coming weeks.

The state is expected to produce a record 14.2 million tons in this second harvest, which will help the country reach 126 million during the entire 2022/23 harvest, according to Conab (National Supply Company) forecasts.

The harvest is large, but prices shrink, which is a worldwide trend. After a strong acceleration, caused by the greater presence of China in the international market and by geopolitical conflicts, the weather will be decisive in this crop for production in areas subject to frost in Brazil and for the performance of the American crop.

Rogério Trannin de Mello, commercial director at Coamo Agroindustrial Cooperativa, says that the projections are for a good recovery of the world crop, but the weather will be an element that could change this scenario.

It is possible to have a clearer view of the demand caused by income, by production, by the evolution of the population and by productivity, but it is very difficult to forecast the effects of climate, says the director.

One of the reasons for the rise in prices in recent years was an error in China’s corn inventory data, detected from 2019 onwards. The Chinese suddenly entered the world market with the potential to purchase 30 million tons of the cereal, but the demand was at least 50 million when including other grains.

The greater demand for corn on the international market led some producers to increase cereal production, to the detriment of soybeans. With that, the oilseed was also discharged.

Corn is no longer food security in China. The producer planted less, stocks dropped and the Chinese went to the market, says Mello.

Data from the USDA (United States Department of Agriculture) show that the Chinese, who imported 7.6 million tons of corn in the 2019/20 harvest, increased the volume to 30 million in the following harvest. In 22/23, there will be 18 million.

At the same time, the Chinese also increased purchases of other grains, such as sorghum. The volume rose from 3.7 million tons in 2020 to 8 million this year. Consumption of this product in China jumped from 6.8 million tons in the 2019/20 harvest to 14 million in 2021/22.

China has become a major buyer in the international market, but the trend is for a decrease in the pace of protein consumption, for health reasons, and, consequently, there will also be less pressure on the demand for raw materials.

There is also an important component, which is the increase in production efficiency. Higher productivity and a reduction in the pace of population growth reduce the China effect on the market.

With less pressure from China, the big growth turns to Africa. The consumption of proteins and grains, however, requires income, a scarce element on the African continent. Even Southeast Asia’s growth still fails to outpace productivity developments. With that, world stocks are more comfortable, says Mello.

What can change this scenario, he reaffirms, is the climate. This forces the producer to seek locks to their costs and play it safe, says the director of Coamo.

Farmers have been very disciplined in marketing since the beginning of the decade, when, in 2004, they bought inputs at the high end and sold production at the low end. But, in 2019, prices went up. In the following years, they rose again, and in full harvest, which led some of them to believe in new highs this year.

However, prices are falling in a period in which there is a delay in commercialization. A good part of the crop was not sold at the high, and the producer is back to living a scenario of 20 years ago, says Mello.

José Cícero Aderaldo, vice-president of Cocamar Cooperativa Agroindustrial, also believes that the weather will be decisive for corn production this year. If bad weather is confirmed during the development of crops in the United States, Brazil will gain importance in the international market.

Aderaldo believes that Brazil has the capacity to export a volume of more than 50 million tons. The USDA, based on the commercial year, which is different from the calendar adopted by Conab, forecasts Brazilian exports of 54 million tons in 2022/23 and 57 million in 2023/24. Conab predicts 48 million in the period from February 2023 to January 2024.

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