Drought hits the field, and grain harvest has fallen by 10 million tons – 06/10/2021 – Market

On a day when inflation data has raised concerns, the news from the field is not encouraging either. The severe water crisis experienced by the country is beginning to reflect more intensely on crops, and the Brazilian grain harvest is expected to drop by 10 million tons.

Estimated at up to 272 million in March, total grain production now drops to 262 million, according to Conab (National Supply Company).

For now, because the product that most caused this fall, corn, still generates uncertainties regarding the final numbers of the harvest. The volume of corn to be harvested this year will be 96 million tons, below the March forecast of up to 108 million.

The release this Thursday (10), made by Conab, is overestimated in relation to figures already released by consultants specialized in the sector. For them, cereal production is close to 90 million tons.

A worrisome fact is that the falls lead to an increase in prices for products that are important in domestic demand and difficult imports.

This is the case with beans. The second crop of the color product, due to the drought, should have a 14% reduction. The result will be higher prices and ending stocks at the lowest levels in five years.

Corn, which is important for the protein chain, with an estimated drop of 12 million tons, will keep prices at record levels, like the current ones.

Faced with this crop failure of cereal, Conab reduced expectations for exports to 29.5 million tons and imports to 2.3 million. In May, the agency expected foreign sales of 35 million tonnes and imports of 1 million.

This drop in corn production weighs on the costs of chicken, pork and beef producers, especially in the second half. The bill will reach the consumer’s pocket.

There is also concern about rice prices. This year’s production is better than 2020, but prices are expected to remain high compared to previous years’ levels. Production rises to 11.6 million tonnes, up from 11.2 million last year.

Wheat stocks are improving compared to 2020, but are still well below the average of previous years.

One of the reliefs for consumers will be the behavior of the dollar. If there is a consistent appreciation of the Brazilian currency, domestic products will be less competitive in the international market. The fall of the dollar also facilitates imports.

External demand remains high, with large consumers such as China rebuilding their inventories and forcing higher international prices.

This external pressure inhibits significant reductions in domestic prices, even with the occurrence of better harvests for some products, such as soybeans.

Rice, despite not repeating the export volumes of last year, should have heated prices internally. Expectations for cereal exports in this harvest were reduced to 1 million tonnes by Conab, down from 1.8 million in the previous one.

Despite the reduction in corn and rice exports, the international market remains favorable for Brazilian soybeans and cotton, which will have a 5% growth in the volume placed abroad. According to Conab, Brazil will export 87 million tons of soy and 2.2 million cotton.

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