Corn clash pops up as US, Brazil farmers face off

Bloomberg

The world’s biggest corn exporters are preparing for a showdown. Brazilian farmers are in the midst of collecting their biggest corn harvest ever and American supplies are also plentiful — setting the stage for a stiff battle to win world buyers in the second half of the year.
It’s a turnaround from just a year ago when US exporters were seeing sales boom as a drought plagued Brazil’s fields. This year, the South American growers enjoyed much better weather and crop supplies have gotten so big that farmers are already short on storage after collecting a massive soybean harvest just a few months earlier. That’s giving exporters incentive to push corn shipments out quickly and could mean a squeeze for hedge funds that are betting on a price rally.
“Buyers rule in the global corn market this season,” Pedro Dejneka, a partner at Chicago-based MD Commodities, said. “Competition between the two major exporters will be tough.”

Prices Drop
December corn futures on the Chicago Board of Trade have dropped 2.4 percent in July to $3.82 3/4 a bushel in London. While the ample supplies and shifting US weather patterns dragged prices lower, the declines were a surprise to hedge funds.
Money managers increased their net-long position, or the difference between bets on a price increase and wagers on a
decline, by 2 percent to 106,815 futures and options contracts in the week ended July 25, according to US Commodity Futures Trading Commission data. The next day, futures fell to the lowest in almost a month.
Brazil’s corn production in the 2016-17 season is forecast to surge 45 percent from a year ago to a record 97 million metric tons, according to the US Department of Agriculture. The agency estimates that the 2016 US harvest reached an all-time high and that the crop gathered this fall will be the second-bigger ever. The USDA will make its first survey-based estimates of US production in August.
Competition has ramped up for farmers in the US, the world’s biggest grower and exporter. Brazil, which barely shipped any corn just two decades ago, has since emerged as a significant competitor. Sales are also on the rise from Argentina, which reaped a record harvest this season.
Brazil’s shipments climb at this time of year, the heart of the country’s winter harvest, and its expected exports are the highest ever, according to vessel line-up figures through 2013. US growers will collect their next crop between September and November.

Storage Crunch
A storage crunch is adding pressure on the market to move grain quickly as the corn harvest advances. The bumper corn harvest has driven domestic prices to the lowest in two years, making supplies attractive to importers.
Meanwhile, US corn shippers are seeing slow bookings for the coming marketing year, which starts in September. The 4 million tonnes of new-crop outstanding sales as of July 20 were 44 percent below last year and the lowest since 2010, USDA data show.
Still, even as Brazil’s shipments surge, the US is expected to remain the world’s top supplier.