Local corn prices, which started rising around June, showed strong upward movement for the most part of in 2020, even at the time of peak harvest, especially in Brazil, taking the markets by surprise.

While robust local and export demand has propelled corn prices in Brazil, delayed planting due to the onset of the La Nina event in Argentina has contributed to the price surge.

The outright prices assessed by S&P Global Platts for Argentina corn FOB Up River for front-month loading topped the year on Nov. 19 at $234.35/mt, 67% above its lowest point on May 21 at $140.45/mt, and 36% above the $172.34/mt from Nov. 19, 2019.

Platts data showed outright prices for Brazil corn FOB Up Santos rose 65% from their lowest point of the year in April to $241.62/mt on Nov. 27, and 37% above the $176.47/mt from Nov. 27, 2019.

“Meat producers’ margins have been falling and we’ll have to see how they will behave in 2021. In general, we expect stronger-than-normal prices for corn in 2021, but it’s still early to tell if they will be as strong as in 2020,” said Daniele Siqueira, market analyst at Brazil’s AgRural.

Supply timing

Even though Brazil is expected to produce a record 102.6 million mt of corn in 2020-21, the timing of arrival of the crop would mean thin supply in the domestic market up to June 2021.

The first corn crop in Brazil is planted during September-December and harvested in February-May, while the second crop is planted in February-March and harvested in June-July.

The first corn production in Brazil is expected to take another hit this season although overall output is likely to be around the same as 2019-20.

The first corn production forecast for Brazil in 2020-21 is expected to fall by 1.6% year on year to 25.3 million mt due to a lack of adequate rainfall in some southern parts of the country, according to AgRural.

“It is important to highlight that the losses recorded in the southern region due to climatic reasons may exert new pressure on demand up to February next year,” Brazil’s Conab said in its recent report.

“If crop conditions continue deteriorating and the 2020-21 crop has a more significant failure over the next two months or so, we’ll probably see domestic prices getting stronger, since local buyers would bid higher, trying to secure supplies. That movement would support prices, no doubt. But Brazilian prices also depend on our currency. So, we [h]ave to see how would be the balance between an eventual tighter supply (bullish) and a [perhaps] stronger Brazilian real (bearish),” Siqueira said.

La Nina risks

The presence of La Nina, a weather phenomenon that is associated with lower rainfall in the southern region of South America, has led to a delay in planting in Argentina and forecasters have already revised crop output downwards.

The Buenos Aires Grain Exchange has projected Argentina’s corn production to be around 47 million mt in 2020-21, falling 4.5 million mt short from 2019-20 levels.

Moreover, with late planting starting in Argentina, it needs to be seen how big an impact La Nina could have on the crop in the next month.

Besides weather troubles, Argentina’s economic difficulties have also made farmers cautious about selling their crop as they view crop as a hedge against high inflation and tumbling currency.

Argentina corn producers have already marketed 10.35 million mt of 2020-21 corn crop by the end of November, which is significantly higher than the five-year average of 6.3 million mt, agriculture ministry data showed.

Farmers have already marketed a considerable amount of corn crop, and will remain under less pressure to sell corn in the 2020-21 exporting year (March-February).

Tightening global supply

The US Department of Agriculture’s Foreign Agricultural Service expects the global corn export market to heat up this season amid bleaker output prospects in key exporting countries.

Global corn exports are projected to grow by 4.8% year on year to 183.46 million mt in 2020-21, and 2020-21 ending stocks may dip nearly 4% to 291.427 million mt, exerting pressure on supply availability, according to USDA’s FAS.

The emergence of China as an aggressive grain buyer is also expected to affect the trade flow.

The traditional US corn buyers, such as South Korea and Japan, will have to widen their purchases from South America. This would complicate Vietnam’s buying plans as they import corn mostly from Argentina and some from Brazil, experts said.