March 6, 2020 / 10:06 AM / 23 days ago

Column: Brazil's soy exporters set for massive March while corn shipments unusually quiet

FORT COLLINS, Colo. (Reuters) - Brazilian farmers are nearly halfway through their largest soybean harvest on record and unsurprisingly, the export schedule is heavier than ever, despite a much slower start to the year. Soybean shipments have taken off in the last couple of weeks and could very likely set records in March, though corn exports look to stay historically light.

A truck is loaded with soybeans at a farm in Porto Nacional, Tocantins state, Brazil March 24, 2018. REUTERS/Roberto Samora

In February, some 5.1 million tonnes of soybeans left Brazilian ports, down just 3% from the record high for the month set in 2019. But in the first two weeks of last month, average daily exports were down around 27% from the same period a year earlier largely due to disruptive rains. January’s volume was down 31% on the year.

Some 72% of the February shipments were to top buyer China, down from 84% last February. With the massive harvest on deck, Brazilian soybeans are cheaper than the U.S. product for the next several months. China has been relatively inactive in the U.S. soy market despite the Phase 1 trade deal, as purchases last week slipped to six-month lows. Brazilian port lineups published by Williams Shipping Agency show that as of Tuesday, more than 10 million tonnes of soybeans were scheduled to sail in March. Last year, the early March lineup had 7 million tonnes of beans planned for the month and exports hit 8.5 million, which was a three-year low.

About half of the March bean lineup is set to sail to China, and another 28% has an unspecified destination, though China is a likely suspect in many of those cases. Brazil’s statistics agency Conab last month estimated the country’s soybean harvest at a record 123.25 million tonnes, up 7% on the year. The U.S. Department of Agriculture sees the crop at 125 million tonnes, and market analysts are not expecting much of a change to that number in Tuesday’s update.

However, industry estimates of Brazilian soybean output have had the tendency to be too conservative at this point in the year, especially in a good year. For example, USDA’s March estimates for the 2016-17 and 2017-18 harvests, which were both record large, were respectively 6% and 7% lower than the final.

Some firms have thrown around the idea of a 130 million-tonne soy harvest, but public estimates are not there yet. Private analytics firm IEG Vantage this week pegged the crop at 128 million tonnes, the highest of the estimates published by Reuters.

Not only do abundant supplies help, but the weak currency has motivated Brazilian farmers to sell soybeans at a faster pace than usual since they are sold on the world market in dollars. Brazil’s bleak economic outlook coupled with global uncertainties around the coronavirus pushed the real to all-time lows against the dollar on Thursday. The real has slid nearly 15% since the beginning of the year.

The most actively traded soybean contract on the Chicago Board of Trade has dropped 6% since the start of 2020 on a dollars-per-bushel basis, but that price converted into reais has risen 7% during that time. Soybean futures in reais per bushel on Thursday finished roughly 19% above the year-ago level.

SLOWER CORN

February through June is typically the off-season for Brazilian corn shipments, as the highly exported second-crop harvest does not begin until June. But February corn exports were unusually light at just 347,419 tonnes. That is an eight-year low for the month and down 78% from last year, and it is the smallest monthly volume since June 2018.

The current March schedule is minimal as well, with just 124,000 tonnes of corn set to sail. Some 827,461 tonnes were shipped last March, and that was coming off a relatively disappointing 2017-18 crop. The latest exports follow last year’s record 101 million-tonne harvest.

Conab last month pegged the total 2019-20 corn harvest at 100.5 million tonnes, with the second-crop estimate very slightly above a year ago. USDA is at 101 million tonnes, and analysts predict the agency will maintain that estimate in its Tuesday update, with the highest guess at 102 million.

Corn planting in the No. 2 corn state Parana in Brazil’s south reached 72% as of Monday, close to average levels. It had notably lagged normal levels until a couple weeks ago. Top grower Mato Grosso in the Center West was 92% finished with planting corn about a week ago, which is a bit above average but a few points off last year’s high. The quicker planting pace in Mato Grosso is a good sign for better yields.

However, it has been dry and the forecasts are not generous with rain through mid-month. Refinitiv data shows that February soil moisture levels in Mato Grosso’s crop-heavy north region and in Parana were at least five-year lows. Accumulated rainfall in North Mato Grosso is running about one-third lighter than normal since the beginning of the year.

But there is still time for Brazil’s second corn crop, and it bodes well that planting was not delayed. Analysts do not yet seem to be concerned about the dryness, but as with soybeans, farmers are ahead on corn sales and hoping for a bumper crop.

The opinions expressed here are those of the author, a market analyst for Reuters. 

Editing by Matthew Lewis

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