Market Talks: Brazil’s third corn crop

Author Argus

While other countries, such as the US, have only one corn crop per year, Brazil has three.

Join Camila Dias, Argus Brazil Bureau Chief, and Alessandra Mello, Deputy Editor for the Argus Brazil Grains and Fertilizer publication. They talk about the potential of the producing region and the expectation for the third corn crop on the coming seasons.

Find out more about our services for the agriculture market.

Podcast episode is in English. Click here to listen in Portuguese.

Transcript

CD: Hello and welcome to Market Talks, a series of podcasts brought by Argus about the main events impacting the commodities and energy sectors in Brazil and around the world. My name is Camila Dias, I’m Argus Brazil Bureau Chief. In today's episode, I'll talk to Alessandra Mello, a Deputy Editor for the [Argus] Brazil Grains and Fertilizer publication about the third corn crop in Brazil. Welcome, Alessandra.

AM: Thank you, Camila, it's great to be here.

CD: Alessandra, let's start by talking about this peculiarity of Brazil, while countries like the US have only one corn crop cycle while Brazil has three. Explain it to us.

AM: Well, Camila, we have the traditional first corn crop, planted mainly in the southern region of Brazil, which has a climate even more similar to North America. The first crop season occurs between September and April, more or less. Then there is the second harvest, which is called “safrinha”, because it was a little crop but is now the main cycle. It is planted in Midwest Brazil, primarily in Mato Grosso and in Paraná state, after the soybean harvest. It usually occurs between January and July. And, finally, we have the third crop, planted from April to September. The production is still not significant when compared to other traditional corn regions, but the growing productivity and the higher corn prices have reinforced the projections for expansion of crops, especially in the northeast of Brazil.

CD: And where is this third corn crop planted?

AM: Especially in the region that was named Sealba, which comprises the states of Sergipe, Alagoas and the north/northeast of Bahia. Conab's statistics also include in the third harvest some areas of corn planted in the same period in the states of Roraima and Amapá, in the northern region, crops that curiously are above the equator, it is another Brazil, the Brazil of the northern hemisphere.

CD: And how has the advance of corn production been there?

AM: In 2021, the National Supply Company (Conab) forecasts that the third corn crop will reach 581,000 hectares, an increase of 8.5pc compared to 2020 drive by area increases in Sergipe and Bahia.

To give you an idea, during a 15-year period in Sergipe the average yield rose from 1,300 kg per hectare (2004-05 crop) to 5,969 kg/ha in the 2020-21 cycle, a level close to the average for the main crop in Mato Grosso, the giant Brazilian state of grain production. Currently, Sergipe also has the largest cultivated area in the region of around 220,000 hectares.

CD: But the Northeast still has a lot of inequality, we know, does that reflect on this scenario?

AM: It certainly reflects, because the type of technology, the type of farming is very unequal, so it is even difficult to get statistics in the region. The corn that is growing there is what is called high technology, larger areas, with the use of fertilizers and pesticides, and with high productivity. On the other hand, the cultivation of corn for subsistence is still very large, we know that the northeast is a region that still has a lot of poverty, especially in the countryside, and families tend to plant corn through government seed donation programs. In these areas, productivity is very low, which ends up making up a little of the general statistics of the region. I talked with a farmer who is a reference in Sergipe, Gleiton Medeiros, he said that for sure the productivity in the region is even higher than the Conab estimates show. Conab technicians told me that soon the company should start disclosing yields in a stratified way, probably dividing between low, medium and high technology, this way it will be easier to understand how the development of agriculture in different regions is going.

CD: And there is demand for this third crop corn?

AM: Demand is strong. The northeast consumes much more corn than it produces. This local production is used not only for animal feed, but also for human consumption – corn-based dishes are part of the traditional diet of northeastern people. For this reason, the crop has attracted new investors, such as businessmen in urban activities who have seen corn production as a way to get high financial gains. Whoever invested R300,000 in the corn crop last year, earned R1million, Gleiton Medeiros told me.

At the same time, the sector is now preparing to start exporting corn, as it also has favorable logistical conditions – producing areas are about 200km from the Inácio Barbosa Maritime Terminal (TMIB), in Sergipe, known as Porto da Barra dos Coqueiros . Farmers in Sergipe say they are already talking to buyers from countries like Iran and South Korea. The expectation is to make the first shipment of corn produced in Sealba in January 2022.

The first corn export in the history of the port of Sergipe concluded in June. Logistics company VLI announced it will ship 60,000 tonnes of grain through the terminal. The cargo comes from the west of Bahia, a region that is more consolidated in high-tech agriculture. However, market participants believe that the door has been opened and this movement should continue to stimulate the advance of planting in the Sealba region.

CD: Alessandra, this year we saw a lot of weather problems in the regions that plant the second corn crop. What can you expect from this third crop, considering this climate issue, was there also a loss?

AM: Unfortunately, there was also a loss there. The first conversation I had with the Sergipe producers was in early June and they were optimistic about the 2021 climate, despite registering some periods of dry weather. The forecast was that Sergipe's high-tech areas would reach more than 10,000 kg per hectare, against 9,000 kg/ha in the past harvest. But I talked to them again at the end of July and the situation is different, it really lacked rain in most of the states. And despite that 8.5pc growth in area, they will possibly harvest an 18pc smaller crop compared to last year, something around 1.5 million t, against 1.8mn t registered in 2020.

CD: We are finishing this podcast, Alessandra, but I have a last question. Do you think that this region of Sealba can become a new standout in grain production?

AM: The potential is huge. If the favorable scenario of high prices remains, the expectation is that corn cultivation will advance mainly in Alagoas state, in areas that were previously used for sugar cane, but which have lost competitiveness for the large groups in the sector operating in the center-south of Brazil. The estimate is that the state could rise from the current 40,000 to 600,000 hectares of corn.

I also talked with Conab's crop monitoring manager, Maurício Lopes, who believes that this expansion will take some time. He considers that the region's climate still poses many risks, as the Brazilian northeast, with its semi-arid climate, is characterized by having some years of severe drought. But I also asked the Sergipe producers about this issue, they say that every 10 years they know they will lose three harvests to drought, in another two the profit is tied with the cost, but that the gain in the other five harvests always will end up paying off, so they are very satisfied with the investment they made in corn. And Mauricio from Conab himself mentioned that we have already seen a similar example in the past, which was called Matopiba, which comprises areas of Maranhão, Tocantins, Piauí and western Bahia. Until the 1980s, many doubted the region's agricultural potential and, with the advancement of technology and adapted seeds, crop productivity doubled, making the region today appear among the main producers of soy, corn and cotton. We have heard a lot about soybean planting in the Northeast as well, especially in Ceará. Who knows? Let's keep following up.

CD: Exactly, let's follow closely! Thank you so much, Alessandra.

This and other episodes of our podcast in Portuguese and English are available on the Argus website at www.argusmedia.com/falando-de-mercado.

Visit the page to follow the events that affect global commodity markets and understand their developments in Brazil and Latin America. We'll be back soon with another edition of Market Talks. See you soon!

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