Brazil has been a big player in the soybean market for many years now, but they’ve been a relatively minor player in the corn market. USDA Chief Economist Seth Meyer says that’s no longer the case.
“They are a big player. They have a big crop. And they’ve seen their own price, or basis, really fall sharply as that big crop comes online.”
Just how big is it? Meyer says this potential record second crop will probably be around 130 million tonnes, or about 5 billion bushels. For comparison, the US corn crop is projected to be about 15 billion.
“And so that’s putting some downward price pressure. Obviously, it’s really affecting competition in the market now.”
So, with the large jump, Meyer wonders what happens next for Brazil’s corn production and marketing system.
“It will be interesting over the coming years to see how that market has to develop, because the Brazilians aren’t going to be able to dump such large crops on the market without really hammering price in the future.”
Meyer recalls what happened years ago as Brazil’s soybean production grew rapidly.
“As the South Americans (crop) got bigger, we would get six months of carry until the next crop came on from South America and then maybe you see reduced carry because there’s another production opportunity. Will we see the same thing develop for corn now that the Brazilian crop is getting bigger?”
We are already seeing a downward adjustment in our own export volumes and prices for corn. Last week, USDA chopped $2 billion off its 2023 forecast for US corn exports. They could end up down 25% from last year.
Source: USDA Radio
