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Corn Prices Rise despite Brazil’s Favorable Output Projection

Sean Brown

How the Brazilian Real Swayed International Grains Prices

Corn prices advance

CBOT (Chicago Board of Trade) corn futures for March delivery rose by 0.21% and settled at $3.54 per bushel on March 4, 2016, despite stronger production indications from Brazil. The Teucrium Corn Fund (CORN) traded on the heels of CBOT and rose by 0.87% on the same day.

INTL FC Stone, in its latest projection for Brazilian corn output, anticipates that the first crop for the 2015–16 campaign could yield nearly 28.2 million tons of corn due to unfavorable weather conditions affecting the quality and quantity during November and February crucial crop development months.

However, the same company has raised its hope that the second corn crop, or Safrinha corn, in Brazil could produce more than 56 million tons. This stronger output projection has a direct relationship with the favorable weather anticipations in the near term. Although estimates have increased from the previous projection, this would add to the projection of ~84.2 million ton output, which is near the USDA’s (United States Department of Agriculture) corn projection of 84 million tons from Brazil.

Other estimates and the Brazilian real

Meanwhile, other estimates suggest that Brazilian corn prospects might revise shortly, after the release of the World Agriculture Supply and Demand Estimation Report’s March edition, which indicates increasing competition for US corn in exports.

Notably, the Brazilan real rose against the US dollar by 3.3% on March 4 due to allegations of corruption faced by Brazilian government officials and to long-anticipated changes in Brazilian politics, which have tended to favor businesses. The strength in Brazilian real would hurt the corn exports because strength in home currency would hurt the export prospects, reducing the yield.

Stock reactions

This latest advance in corn supported the share values of the businesses in corn trading and producing business. On March 4, CHS (CHSCP), Ingredion (INGR), Dean Foods (DF), and Campbell Soup (CPB) increased by 1.3%, 1.5%, 0.78%, and 0.15%, respectively. The DB Agriculture Fund (DBA) rose by 1.1% on the same day.

In the remainder of this series, we’ll continue to look at the latest trends in grain prices as well at how the stock prices of major companies have reacted, moving from corn to soybeans and on to wheat.

First, let’s analyze the latest trends in corn prices.

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