EP 2 πŸŒ½πŸ“ˆ 2022-23 Corn Forecasts in Argentina and Brazil

July 1, 2022
11 min
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🍎πŸ₯‘ Agri Now keeps you updated on news in the agriculture space. For this week, we covered corn production forecasts in the Argentine and Brazilian markets with Global Market Analyst Gabriela Cabezas. Β 

Tune into Episode 2 to hear more about corn production forecasts.

πŸ’» Want more agricultural insights? Get smarter and stay updated on the most important agricultural updates on https://www.tridge.com/intelligence-data



0:01 Hey, thanks for stopping by this is AgriNow.

0:03 A podcast by Tridge. Stay in the now with Tridge’s agricultural insights and data. Let's get onto the updates.

0:16 [Bea] Corn plays a very fundamental role in our food and agricultural ecosystem because it is so versatile it is used as animal feed as most of the crop is utilized as the main energy ingredient in livestock feed.

0:31 [Bea] It is also used to produce ethanol.

0:33 [Bea] Ethanol production increases the price of corn by increasing demand in the United States, for example, 33.69% of the total production of corn was used for ethanol production in 2020, according to the USDA.

0:47 [Bea] Strong demand for ethanol production has resulted in higher corn prices and has provided incentives for farmers to increase corn acreage Despite stronger intentions to cultivate corn and major hindrance lies in the fact that corn is a lot more fertilizer intensive than other crops.

1:04 [Bea] Other rising costs such as seeds and farming equipment are further squeezing profit margins for farmers who would otherwise enjoy nearly record-high prices for grains with this.

1:14 [Bea] Today, we're speaking to our very own Global Market Analyst Gabriela Cabezas, who is currently located in Quito, Ecuador.

1:21 [Bea] She wrote two analyses, one on Argentine corn and another on Brazilian corn.

1:26 [Bea] So if you're interested please check them out on Tridge.com/intelligence-data

1:32 [Bea] Hi Gabriella, how are you doing?

1:33 [Gabriela] Hi Bea, I'm doing great. How are you?

1:36 [Bea] Good thank you.

1:37 [Bea] So let's look at the corn market currently. From what I can see, Gabriela, the situation isn't at its best.

1:43 [Bea] For example the U.S. is reducing its corn production area and getting corn from Ukraine has become harder than ever.

1:50 [Gabriela] Yes, so the global situation for corn is very complicated currently.

1:56 [Gabriela] So as you mentioned, the United States, which is the largest producer globally for corn is reducing its production, which affects the price of corn globally since there's less supply.

2:06 [Gabriela] And additionally the Russia-Ukraine war is not helping either, since Ukraine is the fifth largest producer for corn.

2:13 [Gabriela] And the war is not only damaging crops and reducing production but also preventing exports since ports are closed or destroyed.

2:21 [Gabriela] So, Ukraine's agricultural minister suggested recently that 15 million metric tons of grain storage capacity is lost, destroyed or inaccessible for next season, the 2022-2023 harvest.

2:36 [Gabriela] So the minister called European allies for temporary storage to be able to alleviate this.

2:42 [Gabriela] In addition, the government officials in Ukraine estimate that the total grain area for the 2020-2023 season will be down by 25% from this season.

2:56 [Gabriela] So this indicates that the world will continue to affect the corn industry next season as well as decreased production.

3:04 [Gabriela] So the International Grain Council just released a new forecast for next season that states that production will just reach 1.18 billion tons That it's 13 million times less than the initial forecast.

3:20 [Bea] I see, so on top of the usual culprits for production difficulties.

3:23 [Bea] We have the Russia-Ukraine conflict, making critical input materials like fertilizer expensive, has this stymied production forecasts or raise prices.

3:32 [Gabriela] So prices and inputs for the agricultural industry have increased at a global scale.

3:38 [Gabriela] Every country and every agricultural industry has been affected by this price increase.

3:44 [Gabriela] So the price of petroleum and gasoline have increased globally and are affecting not only the production costs but also the freight costs and shipping cost for each agricultural product, not only corn.

3:57 [Gabriela] So the cost for fertilizer and pesticides has also increased tremendously since the Russia Ukraine war started since Russia is a major producer of both products.

4:08 [Gabriela] So this increase the production cost of corn and many other products as well globally.

4:13 [Gabriela] In addition, many corn-producing countries are facing cost increases and electricity and water.

4:19 [Gabriela] So that has also been price trend that is happening and affecting the wholesale price of fruits and vegetables and any other agricultural product.

4:29 [Gabriela] So these increased costs, has decreased production since many producers are utilizing less fertilizer, pesticides, water, or other resources and many others have decided just not to harvest or draw production since it's not profitable anymore.

4:44 [Bea] I see. So fertilizers and pesticides have affected farmers, decisions to harvest or not harvest corn.

4:51 [Bea] So I think it is a good time to move on to the analyses he wrote on Argentina and brazil.

4:56 [Bea] So let's start with Argentina.

4:58 [Bea] It looks like they're headed into one of their two harvesting seasons for corn that has struggled with the supply of both seeds and fertilizers.

5:06 [Gabriela] Yes, So this season, producers have struggled with the supply of both seeds and fertilizers.

5:11 [Gabriela] As I mentioned, Fertilizer supplies are tight globally.

5:15 [Gabriela] And in Argentina it has been tight as well.

5:17 [Gabriela] Nevertheless, the current forecast for the 2021 corn season, production starts at 57 million tons, which approximately means an 8.6% year-on-year increase compared to last year's production.

5:34 [Bea] I see. So an increase, I'm quite surprised by that.

5:38 [Bea] Did Argentina do anything differently this year that caused that increase?

5:42 [Gabriela] Yes. So actually, the harvest area of corn in Argentina has grown by 5.7% in two seasons corn From 9.5 million hectares in the 2019-2020 season to 10.3 million hectares in the 2021 season.

5:59 [Gabriela] So actually this increase has been pushed by the government and also by the growers.

6:08 [Gabriela] So technology investments in government interventions have really, really helped with this growth in the production in Argentina and the harvest area as well.

6:18 [Gabriela] So since 2016, the Argentinian government has established incentives for more efficient practices to control weeds, pests, and soil care, with all of this helping increase the production of corn.

6:30 [Gabriela] So private companies have also invested in technology and evolution practices to increase their corn supply so they can provide more Argentinian according to the world.

6:41 [Bea] So it sounds like Argentina, both on the governmental level and private companies have been very keen on increasing its quantity, far before there was an indication of a shortage what are forecasts like for the 2022 season. So forecasts are good for next season.

6:58Let's start with the fact that fertilizer costs are already dropping in Argentina.

7:03And over the past months fertilizers have gone from 1000 $442 to 1000 and $60 just in one month.

7:15So it's expected that this costs will continue to decrease.

7:19So taking the fact that Argentina producers can return to the normal fertilizer use and other factors into consideration.

7:28Next season forecast is really good and it's set that Argentina will export 43.1% more corn.

7:36That on the f average of the five previous seasons, is this increase in Argentina?

7:42Also the case in brazil, Argentina and brazil are following a similar narrative.

7:47Despite record high fertilizer costs and increase in the harvest area for both countries is forecasted to help improve the production volume By 33.3% in Brazil compared to last year Reaching 116 million tons this season.

8:03I see.

8:04That's amazing.

8:05Is this increase in Argentina.

8:07Also the case in Brazil, I think there are two main differences between Brazil and Argentina and corn industry.

8:14So first of all, Brazil is currently facing a very difficult season due to weather challenges and that's affecting every single crop in brazil, but also the fertilizer shortage is still affecting brazil and prices do not seem to drop yet.

8:32So that's still an issue.

8:35I see.

8:35Why is the fertilizer shortage affecting Brazil a lot more pointedly than Argentina.

8:40Both countries source their fertilizers from different suppliers and Brazil's trade dynamics for fertilizers highly rely on Russia, since about 20% of their fertilizer imports come from Russia.

8:55So since the war started, the fertilizer prize in brazil has searched by over 100% affecting the wholesale price of agricultural products.

9:04I see.

9:05So those trade dynamics and those prices must have played a very large part on how much fertilizers Brazilian farmers were able to use and thus affect how much corn farmers decide to sell.

9:15Yes, not only in brazil, but producers all around the world have been using less fertilizers in order to reduce the production costs.

9:24So for your first point then, what about weather challenges?

9:27What's really afflicting brazil?

9:29So brazil is currently facing to extreme weathers?

9:33First of all, they have high humidity and heavy rains on the north part of brazil which is causing floods and affecting the crops and on the southern part of brazil, they're facing the opposite, they're facing dry weather high heat and that it's damaging the crops as well.

9:51Before we wrap up to have any forecast for the 2020 to 2023 season for corn in brazil.

9:58So yes, although Brazilian growers have a lot of room to expand their planting area, it will be highly dependent on the supply of fertilizer they will have during the next year.

10:09So far, the forecast for the 2022 2023 corn system indicate that the planting area will expand by one million hectares, Reaching 22.5 million hectares, and this expansion will allow production to reach 100 million tons.

10:25That represents a 12% increase from the forecast for this 2021 2022 season of 116 million tons.

10:35Thank you so much for your time today, Gabriella, thank you Ben for having me today.

10:47If you enjoyed this episode, please leave a review.

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