In the soybean production estimates, CONAB made very slight adjustments from the June report. Yield was unchanged, at a record large 3.36 MT/HA (50 BPA), while total area and production were increased fractionally. Yield estimates have been steadily climbing through the year, while estimates for exports and domestic crush have reluctantly followed along. The chart plots monthly stocks estimates from both the USDA and CONAB. The USDA’s July forecast had record large February 1st stocks of 6.35 MMTs, while CONAB’s latest forecast has January 1st stocks of 5.4 MMTs. The difference of less than 1 MMTs in the course of 30 days is inconsequential to the market. But both stocks estimates indicate that Brazil has the supply available to be a competitive exporter through the US new crop harvest.
While Brazil has the potential to be a larger exporter through the US harvest, current prices offered are not competitive. Brazilian offers for August are at 52 cents/Bu over the CBOT and are 10 cents higher than US offers. September offers are quoted 80 cents over, with no offers quoted until January when new crop supply will start to come available. Brazilian farmers have reportedly been slow post harvest sellers due to low prices, but the recent rally in Chicago – and in world soybean prices could produce significant summer selling and increase late year exports. For now, Chicago is focused on yield and crop size and less interested in world supply or demand. Once an agreement on crop size is reached, the prospect for new crop export demand will have to be addressed.
CONAB raised total Brazilian corn production by another 2 MMTs, which was mostly a function of an elevated safrinha yield. Safrinha yield is now pegged at 5.53 MT/Hectare, which is second only to 2014, and which now puts CONAB’s figure in better alignment with the USDA’s (which as of June was 97 MMTs), and overall today’s update is generally in line with trade expectations. ARC notes that CONAB is still too low with its forecast in June in all but severe-drought years, and so we expect final Brazilian production to exist in a range of 97-99 MMTs. A record exportable corn surplus will be available, fob basis in Brazil this evening is pegged at $.15-.20/Bu over futures through October (vs. Gulf basis of $.25-.40), and massive exports are expected in Aug-January.
However, longer term, Brazilian cash corn prices are below the cost of production, and so very little acreage expansion is expected in 2017/18. US corn exports will suffer this autumn, but so will yield amid heat & complete dryness offered in the 5-15 day forecast period.
