Corn Consumption in 2028: The projection of the Brazilian Ministry of Agriculture and Livestock - and how this can be achieved

Writen by Saulo Joli

One of the main agricultural products produced and consumed in Brazil is corn. This is because, due to its versatility, the product can become raw material for various production chains, serving as an input for the production of feed for pigs, poultry and cattle, in addition to its own use in natura.

Likewise, its possible industrial uses are countless, and range from the food industry, in which corn starch is exceptional in the manufacture of ice creams, jellies, and chewing gum; to the production of items rarely imagined, such as sand molds for castings, matches, electric batteries and even explosives.

Therefore, there is reason to think about an increasingly growing demand for the product, since its consumption, as stated, does not depend exclusively on chains driven to agribusiness, but rather on industrial production in a very generalized approach. Its supply, however - and more specifically its increase - depends on factors that go beyond increased consumption, such as producers' planting intentions, for example.

In an annual publication, entitled "Agribusiness Projections", the Ministry of Agriculture, Livestock and Supply of Brazil (MAPA) makes an forecast, which seek, in general, to analyze the future supply and demand of commodities such as corn, soybeans and wheat, as well as several others.

Speaking specifically about corn, the agency sees, for the next decade, an increase in consumption of 18.9%. Thus, as reported, domestic demand for the product would increase from 59 million tons, to around 70.1 million.

From this, it can be imagine: what are the main factors and sectors responsible for this increase in consumption? Below, some of these factors are presented, and their possible impacts on the commodity.

1. Pig Farming Chain

The pig farming chain is one of the main consumers of corn in Brazil. This year, it is expected to consume around 15 million tons of grain, accounting for around 22.6% of the total consumed.

Pork, in Brazil, has its own barrier to consumer culture, recognized even by the Brazilian Association of Pig Breeders - ABCS. For the entity, the main restrictions on increasing consumption are, among other factors, prejudice regarding the impact on consumer health, and impractical cuts, from the customer's perspective.

Pork in Brazil / 2022

4,4 million tons produced (+5,7%)

1,1 million tons exported (-1,1%)

Per capita consumption of 20,5 kg/y

Although such restrictions are recognized, ABPA - Brazilian Animal Protein Association - projects an increase in per capita consumption of this type of meat for the year 2018, at around 14.7 kilos, compared to 14.4 last year, an increase of 2 percentage points.

Another issue concerns exports: in order to actually increase pig production - and consequently, corn consumption - it is necessary to have optimistic projections about pork exports. This is because, in Mapa's projections, pork consumption would grow by around 25%, while its production would increase by 29%; that is, the difference would have to be exported.

2. Poultry Chain

The chain that consumes the most corn in the country expresses demand figures of around 29 million tons, projected for 2018, which represents around 29.7% of the total produced and 58.1% of the total consumed internally.

Unlike pork, chicken meat is widely accepted and consumed in the country, and its per capita consumption ended 2017 at 42 kilos, an increase of 1.7% compared to the previous period.

In relation to exports, although the sector currently presents a lower performance than that recorded in the same period of 2017 - around 2.2% less -, it is believed that negotiations with the European Union will be resumed, which should significantly increase your demand.

Poultry in Brazil / 2022

14,5 million tons produced (+4,6%)

4,8 million tons exported (+4,2)

Per capita consumption 49,7 kg/y

For the Ministry of Agriculture and Livestock, the sector should grow 3.0% on average until 2028. The United States Department of Agriculture - USDA - predicts that Brazil should remain in the lead among chicken exporting countries, followed by USA and European Union.

3. Cattle Farming Chain

Although it does not present itself, in terms of comparison, as a large consumer of corn, the beef chain also has a growth projection for the next decade in the country. In numbers, today it consumes around 4.2 million tons of grain, which represents around 16.3% of domestic consumption, and 4.4% of total consumption.

Despite successive drops in consumption in previous years, for 2018, Rabobank sees an increase of around 4kg per capita in Brazil. In relation to exports, the agency estimates an increase of 10% for 2018.

4. Industrial Consumption

As previously stated, the industrial consumption of corn takes place in industries from the most diverse segments, from food industries to durable goods, such as steel. The big surprise, however, came from a hitherto unknown type of industry operating in Brazil: the Ethanol industry.

This is because, in 2017, the first corn ethanol industry was opened in the country, which generated a real rush for investments of this type. And no wonder: ethanol generated from corn yields 407 liters per ton of processed product, while its competitor - sugar cane - yields only 89.5 on average.

The newspaper Valor published, this year, an article regarding this new demand and its dimension. According to reports, at least six plants are already being built or expanded in Mato Grosso, which should generate a demand for corn, within a few years, of around 3 million tons. Currently, this demand is already around 1 million.

In summary...

The increase in corn consumption in Brazil depends on a chain that basically concerns its use in poultry farming, pig farming, cattle farming and industrial use, in addition to a few uses on a smaller scale. In this sense, the performance of the supporting chains must support the demand for the grain, which will grow as they expand in national and international markets.

Therefore, in an analysis based on the projection of its demand, in addition to growth prospects for the poultry market - currently the largest consumer market for the commodity - it is necessary to consider, for example, the increase in consumption of pork in Brazil, given efforts of new industries and class entities.

It is essential, however, to conquer more and more international markets, which should sustain growth in the meat market.

New demands for the product must be created, in the same way, by new industry initiatives, especially with regard to ethanol plants.