Brazilians dare to say that 2020 was the year of the corn. And no doubt about it – good prices, increased consumption, strong demand, as well as the devaluation of the Brazilian real that activated foreign markets made it so.
According to Abramilho (the Brazilian Corn Producers Association), in 2020 Brazil exported 30 million metric tons (mt). Notwithstanding, Brazil is starting 2021 with tight ending stocks, and the dryness caused by La Niña is being a factor.
The main Brazilian ag challenge is corn. If they need more, they can bring it from Paraguay or Argentina. However, Mr. Cesário Ramalho, president of Abramilho assured in an interview that high profitability will motivate them to invest more and to grow in land and technology. Abramilho pretends to duplicate production by 2030 with the end goal of producing 150 million mt.
Let me pause. I kind of liked that Ramalho mentioned one coproduct – often neglected in many countries in Latin America – with great future: dried distillers grains with solubles (DDGS). Both the U.S. and Brazil have important ethanol industries from where DDGS comes. He said that this ingredient can be the protein source that will help the animal ag industry to thrive. I think he is right.
Let's recall that Brazil is not alone in the corn race. The United States is and continues to be a powerful producer and exporter. According to USDA November 2020 estimates, the U.S. corn production is at 368.49 million metric tons, a 6.5% increase in production over the 2019 crop. This last crop was the third largest ever recorded in that country. It was due to higher yields, not to an increase in harvested area. As a matter of fact, planted area has slightly decreased over the last five years. The U.S. enjoyed in 2020 enviable weather conditions, leading to a smooth process and excellent corn quality.
The U.S. is also the top world exporter of corn, with ample corn supplies and competitive corn prices relative to other feed ingredients. However, ending stocks are projected to be lower in marketing year 20/21. If you need more data on this, do not hesitate in consulting the excellent 2020/2021 Corn Harvest Quality Report, available in various languages.
To conclude, the U.S. Grains Council reported last week that the "U.S. corn is the cheapest feed globally, and exports are surging." Therefore, end users are the beneficiaries. Can Latin America profit from the proximity of these two big producers?
What do you think?