According to the latest out of USDA’s Brazil attache, Brazil’s corn production is now forecast lower at 92 million metric tons, down -6% from last year. The reason for the downgrade is due to reduced area for first and second-crop corn and an expected return to normal yields. Planted area for first-crop corn has decreased 9 of the last 10 years, but low prices after last year’s record harvest and abundant global supplies have pushed even more farmers to choose soybeans over corn for their first planting of the season. Data form Brazil’s CONAB showed that the average corn price in December 2017 was -25% lower than a year before. From what I am hearing, lower prices are also reportedly leading some producers to cut back on inputs for corn this year, as the prevailing price in many parts of the country is still below the break-even price for biotech corn. CONAB estimates a -9.2% reduction in first-crop corn area nationwide compared to 2016/17. Planted area for second crop “safrinha” corn, which is typically sown in February after the soybean harvest, is also forecast to decrease slightly. Safrinha corn is forecast to make up approximately 70% of Brazil’s total corn production in 2017/18, but delays in soybean planting in Mato Grosso have led to delays in early soybean harvest, narrowing the window for planting second crop corn to avoid the dry season. Understand, Mato Grosso is responsible for 40% of Brazil’s total corn production and is the state with by far the largest safrinha crop. Some farmers in western Mato Grosso are also reportedly considering planting cotton instead of corn as a second crop this year, due to attractively high global prices for cotton and already abundant corn supplies globally. However, the downside for second-crop cotton is that it has a very limited planting window and must be planted by early February, which is a challenge give the slow start to the soybean harvest this year. (Source: USDA, FAS Gain Report, Brazil)

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