The last few weeks have been extremely important for the Brazilian soybean and corn crops. For the former, the floods in Rio Grande do Sul continue to impact harvesting work and bring uncertainties about the state's production, while for corn the main uncertainty lies in the impact of low soil humidity in the Center West.
But how do these developments impact our production estimates?
In soybeans, the harvest has practically been completed in most states, with the exception of Rio Grande do Sul - and this is where the big difference between our estimate and Conab's lies.
Source: Conab.*Hedgepoint forecast
In its latest crop update report - released on May 14 - the agency cut Rio Grande do Sul's production estimate by around 0.4M mt, which represents a cut of less than 3% on the estimate of almost 22M mt for the state production in April.
However, we understand that the impacts of the floods will be much greater than those currently predicted by Conab. According to Emater/RS, there has been a drastic reduction in the quality of the grains compared to the product obtained before the excessive rainfall. It is estimated that the harvested area has reached 85%.
Furthermore, progress is unlikely to be significant in the coming days, as many crops, of the remaining 15% are likely to be abandoned due to economic unfeasibility, i.e. the harvest from these areas does not cover the costs of the operation and freight.
Given these impacts, we estimate a crop of 18.2M mt for the state, a reduction that is somewhat offset by positive adjustments in the Center West, since data from local agencies point to results above those estimated in recent months.
As a result, our estimate is for a crop of 146M mt of soybeans in Brazil in the 23/24 cycle, 4.1M mt lower than our previous reading.
Furthermore, progress is unlikely to be significant in the coming days, as many crops, of the remaining 15% are likely to be abandoned due to economic unfeasibility, i.e. the harvest from these areas does not cover the costs of the operation and freight.
Given these impacts, we estimate a crop of 18.2M mt for the state, a reduction that is somewhat offset by positive adjustments in the Center West, since data from local agencies point to results above those estimated in recent months.
As a result, our estimate is for a crop of 146M mt of soybeans in Brazil in the 23/24 cycle, 4.1M mt lower than our previous reading.
Source: Conab, hEDGEpoint
In corn, the market's focus is on the final stages of the winter crop,
which is due to be harvested in the coming weeks. Since our last crop update,
several regions in the Center West have received below-average rainfall, keeping
soil moisture at the lowest it has been in the last five years, and only a few
regions in MT have favorable crop conditions, according to Conab.
