São Paulo – So far, 2021 has seen high-record prices and a strong demand in the maize market. Year to date, exports from Brazil climbed 30% from a year ago. Despite the high in prices, the Arabs stepped up their purchases, which fetched USD 212.5 million year to date through March, up 132%.
Cepea, an applied economics center at São Paulo University, which tracks maize prices, reported a smaller maize supply in the market. Farmers are keeping an eye on the low supplies of the 2019/2020 season and concern over the development of new crops. The demand from buyers, though, has remained high and with short notice. “Therefore, the cereal’s prices has remained on the rise, breaking real records across several markets Cepea tracks,” says a news release made public the institution earlier this week.
To understand the record-high prices, we must look at the strong demand both from the domestic and the foreign market.
Foreign market
It has become more expensive to buy maize not just in Brazil but in the foreign market, too. “The United States suffered crop losses for two years straight. Over the last weeks, a new factor has come into play. The speculation over a crash in the U.S. crop this year due to a climate issue that could reduce the supply even further. Nothing’s certain yet, but it has made the market restless,” consulting firm Datagro senior cereal analyst Flávio França Junior told ANBA.
Amid doubts over the volume of maize, China stepped in and rounded up millions of tons of maize from the U.S. Last February only, in a single purchase, the Asian giant purchased 2.1 million tons of the product, the U.S. Agriculture Department (USDA) reported.
The Chinese move could be one factor that made the Arabs seek more of the commodity from Brazil. In the bloc and the overall ranking of destinations of the Brazilian good, the top buyer in 2021 is an Arab country, Egypt.
Year to date through March, Egyptians purchased USD 158 million of maize from Brazil, up 295% from a year ago. “Egypt already was among the top buyers of maize from Brazil – last year it was the four major destination. But generally, the Arabs didn’t usually buy so much in this period [first quarter], not at the volume we’ve seen so far,” França Junior pointed out. Besides Egypt, Morocco and Saudi Arabia were also among the top buyers of the commodity from Brazil.
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Domestic demand
The analyst emphasizes that right now farmers are capitalized and in no hurry to sell their supplies. As supplies dwindle in the domestic market, this puts pressure on prices. “The increase in values has been a trend for the year. Year to date, we’ve seen that domestic and foreign prices are on the same footing. The current crop is unfortunately smaller than the last, which has made domestic prices reach record-high levels. The winter crop, tough, should come in July, but it isn’t likely to change the situation,” França Junior believes.
The rise in prices has favored the farmer, who, despite the somewhat lower exchange rate, has sold well in the domestic market. The development of the situation, however, could cause a domino effect and reach other sectors. This is the case of the poultry sector, which has maize as a staple in poultry feeding. “The problem is that, when this happens, a party loses out as the buyer can’t pass on the increase to the consumer. This ends up reflecting on poultry sales, for example,” he finishes.
Translated by Guilherme Miranda
