According to their own statistics agency, the corn supplies in Brazil reached, a few weeks ago, the lowest levels in at least a quarter of a century.
But the U.S. Department of Agriculture doesn't expect a scenario like that to happen before early next year.
The USDA versus Conab story is not new. The controversy erupted last year over the two agencies’ highly variable estimates for Brazil’s soybean and corn harvests.
On a broader scale, the explanation is straightforward. The USDA and its Brazilian equivalent, Conab, have differences across the board, covering both production and demand. This means there is probably no “right” answer.
But with global corn supply expected to fall to near three-decade lows later this year when compared to demand, it may be worth looking at trends in Brazil.
Vital review
Before discussing forecasts, it is essential to understand the relevant timeframes. For Conab, Brazil’s 2024-25 corn marketing year ends on January 31, 2026, while USDA’s ends a month later.
This March-February Brazilian marketing year is reflected in the USDA world corn balance sheet, which reflects an aggregate of local marketing years. Therefore, USDA world corn stock estimates are not point-in-time, but rather span a period of several months.
This is different from how the USDA handles its global soybean registry, where Brazil and Argentina shift the marketing year to October-September.
Opposite production
The USDA on Tuesday maintained its estimate for Brazil's 2024-25 corn crop at 126 million tonnes. However, the agency reduced its projection for the 2023-24 harvest by 3 million tonnes to 119 million.
On Thursday, Conab increased its estimate for the 2024-25 harvest by less than a million tons, totaling 122.76 million. The projection for last year remained unchanged at 115.7 million tons.
Those changes have brought the agencies closer together. Combined across both crop years, USDA now has a corn production estimate 6.5 million tons higher than Conab, down from 10.3 million last month.
The numbers never need to converge, however, because over the past four years, USDA’s production numbers remain at least 2.5% above Conab’s. The deviation for the 2022-23 crop, which both agencies agree was Brazil’s largest, still stands at 3.9%.
In numbers
Conab says supplies are tight now, while the USDA expects them to remain quite tight a year from now.
Conab data shows Brazilian corn stocks at around 2 million tonnes for 2023-24, which ended six weeks ago. Both that figure and the associated stocks of 1.7% are the lowest in Conab’s history since 1999-00.
The Brazilian agency sees a recovery by next January to 5.5 million tonnes and 4.6%. That compares with decade averages of around 10.5 million tonnes and 11%.
As of late February, the USDA believes Brazil’s corn stocks totaled 7.5 million tonnes, down from 10 million in 2022-23 and similar to the decade average. But it projects 2024-25 stocks will fall to a 23-year low of just under 3 million tonnes.
Low stocks and impact on Brazilian corn exports
This corresponds to a stocks-to-use ratio of 2.2%, which would be a 42-year low in the USDA database. The recent 10-year average is 7.8%.
The one-month shift between the two agencies’ marketing years may explain part of the differences. Brazil typically exports no more than 4% of its annual volume in February, the month in question, although domestic consumption accounts for much more use.
USDA is more optimistic about Brazil’s corn exports than Conab. On average, over 2023-24 and 2024-25, the US agency estimates Brazil will export about a third of what it produces, above Conab’s assumption of close to 30%.
Recent exports do not give the appearance of abundant supply, as monthly Brazilian shipments have been slightly below average. Future export potential depends on Brazil's new crop plantings, as well as the upcoming corn harvest in the United States, the largest exporter.
Although the timing is slightly different, both agencies’ forecasts indicate below-average Brazilian corn supplies at some point in the year. This highlights recent market concerns about dwindling stocks. As a result, this year’s crop performance could be pressured.
Source: Karen Braun Editing and Matthew Lewis | Notícias Agrícolas
