What's behind the clashing ideas over Brazil's shrinking corn stocks?

Reuters

13-03-2025

NAPERVILLE, Illinois, March 13 (Reuters) - According to its own statistics agency, Brazil's corn supplies as of a few weeks ago hit the lowest levels in at least a quarter-century.
But the U.S. Department of Agriculture does not expect a scenario like that to unfold until early next year.
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So which is it?
The USDA-versus-Conab storyline is not new. Controversy erupted last year over the two agencies' highly varying estimates for Brazil's soybean and corn harvests.
On a broader scale, the explanation is straightforward. USDA and its Brazilian equivalent Conab hold differences across the balance sheet, spanning both production and demand. This means there is likely no 'right' answer.
But with available world corn supplies later this year projected to fall near three-decade lows when compared against demand, the trends in Brazil might be worth unpacking.
VITAL REVIEW
Before discussing forecasts, it is critical to understand the relevant time frames. For Conab, Brazil's 2024-25 corn marketing year ends on January 31, 2026, while USDA's ends one month later.
This March-February Brazilian marketing year plays out on USDA's world corn balance sheet, which reflects an aggregate of local marketing years. Therefore, USDA's world corn stock estimates are not point-in-time but rather span a time frame of several months.
That is different from how USDA handles its global soybean ledger, where Brazil and Argentina are shifted to an October-September marketing year.
OPPOSING OUTPUT
USDA on Tuesday maintained the 2024-25 Brazilian corn crop at 126 million metric tons, though it reduced the 2023-24 harvest by 3 million to 119 million tons.
Conab on Thursday increased the 2024-25 crop by less than a million tons to 122.76 million and left last year unchanged at 115.7 million.
These changes brought the agencies closer together. Combined over both crop years, USDA now holds a corn output estimate 6.5 million tons higher than Conab, down from 10.3 million last month.
The figures never have to converge, though, because for the recent four years, USDA's production numbers remain at least 2.5% above those of Conab. The deviation for the 2022-23 crop, which both agencies agree was Brazil's largest-ever, still sits at 3.9%.
BY THE NUMBERS
Conab says supplies are tight now, whereas USDA expects them to be fairly tight a year from now.
Conab's data shows Brazilian corn stocks around 2 million tons for 2023-24, which ended six weeks ago. Both that figure and the associated stocks-to-use of 1.7% are the lowest in Conab's history back to 1999-00.
The Brazilian agency sees a recovery by next January to 5.5 million tons and 4.6%. That compares with decade-averages of about 10.5 million tons and 11%.
As of February's end, USDA believes that Brazil's corn stocks totaled 7.5 million tons, down from 10 million in 2022-23 and similar to a decade-average. But it projects 2024-25 stocks plunging to a 23-year low of just under 3 million tons.
That corresponds with a 2.2% stocks-to-use ratio, which would be a 42-year low in USDA's database. The recent 10-year average is 7.8%.
The one-month shift between the two agencies' marketing years might explain part of the differences. Brazil typically exports no more than 4% of its annual volume in February, the month in question, though domestic consumption accounts for much more usage.
USDA is more optimistic on Brazil's corn exports than Conab. On average over 2023-24 and 2024-25, the U.S. agency has Brazil exporting about a third of what it produces, above Conab's assumption near 30%.
Recent exports do not give the appearance of abundant supply as monthly Brazilian shipments have been a bit below average. Future export potential depends on Brazil's newly sown crop as well as the upcoming corn harvest in the United States, the top exporter.
While the timing is a bit different, both agencies' calls for well-below-average Brazilian corn supplies at some point within the year's span certainly highlight the market's recent concerns about dwindling stockpiles, putting pressure on this year's crops to perform.
(The opinions expressed here are those of the author, a market analyst for Reuters)