3 Updates on Brazil’s Struggling Safrinha Crop

April 29, 2021. Delayed planting and unfavorable conditions are catching up with Brazil’s second corn crop, safrinha, according to a newly released remote sensing analysis of South American farmland from Indigo. Conditions of the safrinha crop, which was expected to account for more than 75% of the country’s total corn production this season, are dragging Indigo’s total national yield lower to 5.1 metric tons per hectare (mt/ha) from last month’s forecast of 5.8 mt/ha. This brings Indigo’s total corn production forecast down to 99.5 million tons, almost 9.5 million tons below the USDA’s and Companhia Nacional de Abastecimento’s (CONAB) own April estimates. 

How should this news inform your marketing or merchandising plan? Here’s three points to keep in mind:

  1. Stocks-to-use ratio could reach a 26-year-low. The global stocks-to-use ratio for corn, per the USDA, is reaching its lowest levels since the 2012/2013 season (excluding China). If the corn crop production for South America stays true to the current forecast – 99.5 million tons – while use remains unchanged, the stocks-to-use ratio will be as tight as it was in 1995. In the 2020/21 season, greater demand than originally expected has been the primary driver for rising corn prices. Now, the Brazilian corn crop could take world stocks even lower, giving North American growers incentive to plant more corn and causing buyers, like animal feeders, to consider alternative feedstocks, like wheat or other small grains.    
  2. Brazil's two-week precipitation outlook is tenuous. The primary detractor to safrinha's success, as with any crop, is lousy weather.

    This South American growing season has been defined by the starts and stops of rain. La Niña-related rain delayed planting first corn and soybean crops, and as such tightened the planting window for its second corn crop. After this initial planting, wet weather gave way, warm and humid conditions settled in, bouts of precipitation came in as needed, and crop health looked nothing short of excellent. Then harvest came around and the wet weather came back. The safrinha planting window constricted even further and ended up being planted three weeks later than normal, the latest planting in at least 10 years.

    Dry weather is now the story. Rainfall has been severely lacking in Brazil's most important corn production regions for over a month, and will continue to be lacking for the next two weeks. The graphics above were released by the National Oceanic and Atmospheric Administration (NOAA) on April 26th and highlight the anomalously dry conditions in Brazil’s key growing regions.

    Without enough rainfall to make up the difference before pollination, safrinha will struggle to rebound to the ten-year crop health median. Lower peak crop health observed via our satellite data has consistently correlated with lower end-of-season yields. According to Indigo's in-house meteorologist, Dr. Julia Lange, these extensive drought conditions are not actually all that new for South America.

    "While the combination of La Niña and majority moderate drought conditions could have a particularly negative impact on safrinha harvest,” she says, “dry spells aren’t unusual for the central west region. Recent studies show that the frequency of moderate and severe droughts have increased since 2011/2012. Although deforestation and global warming might be easy to blame, there is no conclusive scientific evidence available as of today.”

  3. Our satellite-based forecasts of yield indicate there is still slight hope for improvements. A certain threshold of remote sensing data, which we refer to as “signal,” is needed to deliver confident production forecasts. This is true of any analysis: there either is, or there is not, enough information to make predictions.

    For a crop, signal reaches critical mass when the plant’s overall biomass is extensive enough to absorb and reflect a wide spectrum of visible and invisible light in quantities greater than the surrounding soil or residue. This information is coded into satellite imagery and revealed once the images are analyzed through a system of different practices, including machine learning. Safrinha has historically reached this critical mass of signal in early April. By analyzing the crop at that time, in combination with other vegetative information captured by satellites such as soil temperature and soil moisture, we can make fully remote sensing-based production estimates.

    The historic late planting of safrinha this year is a main contributing factor to lower than expected estimates. That is to say, the crop looks starkly different at this point in the season than it has at similar points in the last decade of historical information. As the crop matures over the next month, it can catch up, sending a wave of signal later than usual to bring crop health (and therefore, production) back to average levels.

    But the historic late planting and long dry spell mean the hope for a rebound is thin. All eyes are on the weather. If rain comes into the forecast, Brazilian farmers may find a more average year than currently projected. 

Stay tuned for our next report. In two weeks, Indigo will release its next market report, updating corn and soybean production estimates in Brazil and Argentina for the final time this year. An update on the health and productivity of safrinha will be an important part of that story. 

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