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Brazil's early 2020 corn stocks tight on export binge, China meat imports

Credit: REUTERS/UESLEI MARCELINO

Brazil's corn inventories will be tight or potentially insufficient to meet local demand early in 2020 as high export sales over most of 2019 and increased corn purchases by local meat producers deplete stocks, analysts said.

By Ana Mano and Roberto Samora

SAO PAULO, Dec 3 (Reuters) - Brazil's corn inventories will be tight or potentially insufficient to meet local demand early in 2020 as high export sales over most of 2019 and increased corn purchases by local meat producers deplete stocks, analysts said.

The amount of corn available in Brazil's center-south is poised to fall to a three-year low, according to data from agribusiness consultancy Agroconsult.

An indicator measuring the ratio of corn inventories to usage is expected to fall to 23% by May 2020, the lowest since 2017, it said.

Brazilian corn exports are forecast to reach a record of 41 million tonnes in 2019, up 80% from the previous year, amid problems with the U.S. crop and bolstered by the weak real BRBY, which is favorable to local exporters.

Delays in second corn planting resulting from a delayed summer crop may also lead to smaller production, and the need to import the cereal early next year, the analysts said.

"The potential lack of corn in the market in May will automatically be corrected by a rise in price and by a search for import parity," Agroconsult President André Pessôa said. "If that occurs, some imported corn may enter Brazil's Southern and Northeastern markets."

Brazil's low corn inventories reflect stepped-up purchases by local meat-packers to obtain livestock feed and boost meat exports to China, whose food imports rose after a deadly pig disease decimated herds there.

Demand from local ethanol producers is also heated as new Brazilian corn-ethanol plants come online, analysts said.

Paulo Molinari, a consultant with Safras & Mercado, estimates Brazil's carryover stocks at 11 million tonnes at best.

"With corn consumption in the first half seen at 37 million tonnes, it is a very tight scenario," he said, adding Brazil's first-corn output is forecast at 25 million tonnes.

Brazilian farmers are expected to harvest another large corn crop despite soybean planting delays.

Farmers have sowed 87% of Brazil's soybean area through Nov. 28, below last year's 93% level but in line with a five-year average, according to consultancy AgRural.

Given soybean planting is behind this year, second corn sowing will extend into March.

"While this is not entirely unusual, it raises risks associated with scarce rainfall, shorter days, and frosts in Southern Brazil," AgRural said referring to second corn, which accounts for 75% of Brazil's output.

Despite risks, Brazil's 2019/2020 total corn area will grow by 3.9% and production is forecast to reach 102.4 million tonnes this season, Agroconsult data show.

(Reporting by Ana Mano and Roberto Samora; Editing by Steve Orlofsky)

((ana.mano@thomsonreuters.com; Tel: +55-11-5644-7704; Mob: +55-119-4470-4529; Reuters Messaging: ana.mano.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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