The Brazilian fertilizer association, ANDA, reported total fertilizer sales for the month of December at 2.4 MMTs. This is down slightly from last year’s 2.7 MMTs. As the soybean crop has been largely planted, sales at this time of year are typically for the 2nd Brazilian corn crop that will be planted following the soybean harvest. Combined Nov-Dec sales totaled 5.7 MMTs, slightly less than a year ago, but still the 2nd largest in the last decade. The attached chart plots the relationship between Nov-Dec fertilizer sales and Brazil’s safrinha corn crop. Note that CONAB’s estimate for safrinha corn acres is identical to a year ago, at 12.1 Mil Ha, while the fertilizer data does not offer a compelling reason to strongly disagree.
The safrinha corn crop is typically low yielding (relative to US yields) but has become increasingly important for both the Brazilian farmers and the world corn market in recent years. In 2004/05 the safrinha crop amounted to just 7 MMTs, while last year’s crop totaled a massive 67.4 MMTs! The record yield of 5,495 Kg/Ha (95 BPA) was set in 2014/15 crop, while record production was reached last year on expanding area. But note that while yields are considerably less than the US, they have followed a similar trend higher over time. CONAB’s January yield forecast of 5,806 Kg/Ha (92.5 BPA) was near unchanged from a year ago, and 5% over trend. However, weather in the upcoming weeks will be key in determining both total area and yield.
While area and yield forecasts are basically unchanged from a year ago, the chart shows that CONAB has a consistent history of underestimating area, yield, and crop size in their January estimate. In 10 of the last 11 years, the January report has underestimated total safrinha corn area by an average of 12%. Ultimately it’s changes in yield that have had the greatest impact on production changes. In 9 of the last 11 years, CONAB has underestimated yield. The most notable miss occurred in the 2015/16 crop year, when extreme drought put the final safrinha corn yield 48% under the January forecast, which cut the final crop size by nearly 14 MMTs.
This miss, is a reminder of the importance of weather (in a La Nina year) for a crop that has yet to be planted. The CBOT will closely watch rainfall across key states of Mato Grosso do Sul, Mato Grosso, and Goias in the coming months. Moreover, Mato Grosso farmers are also looking at planting cotton, a far more profitable crop than corn. This could help limit any future winter corn seeding expansion.