It's really too early to talk about Brazil's second-crop corn, what with soybean planting only now coming to an end there. Even the two agencies that project the size of Brazil's crops won't go near making an estimate yet.
For one thing, planting won't start until at least mid-February, and local corn prices in Brazil right now are hardly promising. They were $3.11 in Paraná state last I checked. And the statewide average cash price up in Mato Grosso last week averaged only around $2 per bushel last week.
But China just inked a deal to buy more corn from Brazil over the coming years in a strategic effort to reduce its dependence on U.S. corn.
We all know, of course, that the Chinese cancel orders left and right—they canceled thousands of tonnes of soybean orders from Brazil at the outset of this year when port problems kept ships at anchor for too long, waiting to load. Even so, the Asian country said it would buy up to 10 million tonnes of Brazilian corn per year, for the next several years.
That's a lot of corn. After all, total Brazilian corn exports last year—when the U.S. underwent a major drought—came to just 20 million tonnes.
It's especially important to producers in far-off Mato Grosso state, who plant more second-crop corn than anyone else, often following combines in the fields with planters full of seed corn. Renato Rasmussen of Rabobank told me the country would likely produce 76 million tonnes of corn in the 2013-14 year, despite the fact the federal government has just finished yet another purchase auction in Mato Grosso to buy up some of that corn—some of which had spent at least some time under tarps in fields, waiting for someone to free up some of the limited storage by shipping soybeans.
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Rasmussen says the Brazilians may plant more corn when prices rise, but they won't plant a whole lot less corn just because prices dip. "For Brazilian second-crop corn production, the price elasticity is much greater on the positive side than on the negative side," he says.
That means double-crop producers are amping up their double-cropping to plant corn and soybeans in the same year, if they can. And they do it for the same agronomic reasons you rotate.
As a result, the Brazilians will always have a lot of corn to sell, but will that corn be worth it at the price? Hauling a tonne of corn costs every bit as much as hauling a tonne of beans, but with a lower return per pound of freight hauled.
Put another way, it means hauling a bushel of corn 500 miles affects the final price a lot more than hauling a bushel of soybeans the same distance.
So far, the Brazilian farmers I've talked with have no plans to grow more corn in response to the announcement from China. One gets the idea they'd just like to sell what they have on hand first.