Macquarie Sees Corn Price Gain, Soybean Drop on Brazil

Corn prices may be supported in the next three to six months as wet weather erodes prospects for Brazil’s second harvest, while soybean prices may drop as shipping bottlenecks ease, Macquarie Group Ltd. said.

Brazil’s secondary, or safrinha, corn harvest may be about 34.7 million metric tons, down from last year’s record 38.6 million tons, London-based Macquarie analyst Chris Gadd said today in an e-mailed report after a tour of South American crop areas. Brazil harvests two corn crops annually, with farmers collecting the first crop starting in February and the second starting in June. Total corn output in the country may be 69.1 million tons, less than the U.S. Department of Agriculture’s forecast of 72.5 million tons.

Wet weather during planting in Mato Grosso, the largest producing region for the second crop, prevented plants from putting down deep roots, which may leave them at risk if the weather turns dry, Gadd said. Corn rose to a record in August on the Chicago Board of Trade as drought cut U.S. supplies and prices are up 4.6 percent this year. Brazil may tie with Argentina as the world’s second-biggest corn exporter this season, with the U.S. ranking first, according to the USDA.

“We are concerned for the fortunes of the Mato Grosso safrinha corn crop,” Gadd said. “There is a significant yield risk. Late plantings suggest pollination will now occur during May when temperatures are lower and precipitation is limited in comparison to April. These risk factors are compounded by the poor root structure that was driven by a wet planting period.”

Soybean production in Brazil, set to become the world’s largest exporter, may be a record 81 million tons, Gadd said. The country may be able to export 5.5 million tons of soybeans and 1.5 million tons of soybean meal a month from March through August. Ports may be busiest from June to August, as the corn harvest accelerates. Brazil’s port capacity for soybeans, soy meal and corn is 8 million to 9 million tons a month, he said.

Brazilian Logistics

“We believe that in the coming weeks, Brazilian infrastructure will prove itself capable of exporting” enough soybeans and soybean meal to meet global demand, Gadd said. “The biggest risk to our bearish view comes in June to August when we believe logistics in Brazil are most under threat.”

A new law in Brazil limiting the number of hours truckers can drive is increasing shipping bottlenecks, he said. Truckers may drive only eight hours a day and are required to take one-hour breaks between four-hour shifts. Vessels are waiting 55 days on average to load crops at the port of Paranagua, he said.

In Argentina, corn production may be 24.9 million tons and soybean output may be 49.5 million tons, higher than previously estimated because weather conditions have improved, Gadd said. Soybean farmers facing financial constraints may be aggressive sellers during the harvest, pressuring prices, he said.

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