If there is a silver lining to Brazil’s recent shortcomings in grain exports, the country is now more prepared than ever to pump out big volumes in 2017, perhaps to the dismay of its competitors.
Brazil is the No. 1 and No. 2 shipper of soybeans and corn, respectively, but earlier this year, the drought-stricken country found itself with much less exportable supply than expected at the wrap-up of harvest.
Brazil should be at the height of corn shipping season from October through December, but saying that corn exports have been dismal over the last two months might be far too generous.
Shipments for corn and its byproduct, ethanol, were down by nearly 80 per cent in October and November versus a year ago. Soybeans fared slightly better with exports down two-thirds over the same time frame, although exports of the oilseed do not usually get going until February or March.
But now with the drought of 2016 mostly in the rear-view mirror, record corn and soybean crops are a real possibility heading into 2017, particularly if favourable weather holds.
And although Brazil has notoriously faced transportation and logistical issues at ports in the past, that is much less the case today.
The upcoming 2016-17 export season could be one of the smoothest Brazil has seen in recent years. And if domestic soybean and corn prices are internationally competitive once the products arrive to market, the United States, one of the country’s main trade rivals, will start feeling the pressure.
Full fields, clear ports
In 2015-16, the Brazilian soybean and corn harvests were originally projected to top 100 million and 80 million tonnes, but late-season drought cut the volumes to 95.4 million and 66.6 million tonnes, respectively. The second crop corn, also called safrinha, was hit especially hard.
But the 2016-17 season is already showing promise as both soybean planting and development is ahead of normal, and 94 per cent of the first corn crop is in good condition. Analysts polled by Reuters expect both crops to set new records this year — 102.64 million tonnes for soybeans and 86.58 million tonnes for corn.
If the good weather continues, soybean harvest could begin later this month. This means that the oilseed could arrive on the market a little earlier than usual this year, potentially cutting in to the U.S. business. Early soybean harvest also means an earlier start to the sowing period for safrinha, which accounts for roughly two-thirds of Brazil’s total corn.
Corn does not typically start being shipped out en masse until August, as the safrinha crop is more heavily exported than the full-season corn, which is mostly dedicated to domestic use since the ports are full of soybeans when it is harvested.
Vessel traffic at Brazilian ports is unusually light for this time of year. This owes mostly to the drastically lower year-on-year export volumes out of major ports, but improvements in logistics over the last year or so have also helped.
The average number of days that vessels had to wait outside the No. 1 port of Santos last month was nine, down from 20 days last November. Wait times at another key southern port, Paranagua, were cut from 56 to six days over the same time frame.
Brazilian shippers have also massively increased the usage of ports in the northern part of the country over the last year, which has also helped lighten the load on the southern terminals. Northern ports are particularly attractive to the largest soybean-producing state of Mato Grosso due to their proximity.
Brazil is expected to ship a record volume of soybeans in the 2016-17 marketing year, which begins in February 2017 and runs through January 2018 for the South American country.
Current industry estimates range from 57.5 million to 60 million tonnes, well above figures for the 2015-16 year which stand at or just above 50 million tonnes.
Relatively speaking, the drought impacted corn exports much more than soybeans, as shipments in the current marketing year will fall up to 50 per cent from the record 2014-15 campaign. Industry estimates for Brazilian corn exports range from 16 million to 19 million tonnes for the 2015-16 season, which will conclude at the end of February 2017.
Analysts peg Brazil corn exports to be the second-largest volume on record in the 2016-17 marketing year, beginning in March 2017. Shipments are likely to range between 25 million and 30 million tonnes.
As the agriculture market learned from Brazil’s previous season, a lot will be subject to change over the next few months, especially if the weather starts to sour. But if the weather remains supportive and export prices are attractive to buyers, Brazil’s trade competitors have good reason to start getting nervous.
Karen Braun is a Reuters grain market analyst, the views presented in this column are her own.