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April 18, 2016

Speculation grows that Brazil could Import U.S. Corn

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Speculation is growing that Brazil could start importing corn from the United States if the Brazilian government temporarily eliminates the 10% import tariff for corn brought in from outside the Mercosul trading block. It all but seems assured that the tariff will be lifted making it feasible to import U.S. corn into northeastern Brazil.

The city of Fortaleza is one of the largest cities in northeastern Brazil and corn is currently being offered at R$ 54.00 per sack or $7.00 per bushel, which is 56% more than last year at this time. The president of the Poultry Producers Association of the State of Ceara, where Fortaleza is the capital, feels the price of corn at the Gulf of Mexico is right on the cusp of being profitable for importing into northeastern Brazil.

Importing corn right now from the U.S. would cost about R$ 44 per sack (US$ 5.70 per bushel) if the 10% import tariff remained in place. If the 10% tariff was eliminated, the price would drop to R$ 40 per sack or approximately US$ 5.20 per bushel. Corn from the United States would have to compete with corn from Argentina and the current price of corn from Argentina is R$ 41 per sack or US$ 5.32 per bushel. So, if the tariff is eliminated, U.S. corn would be a little cheaper than Argentine corn going into northeastern Brazil.

The potential price of U.S. corn would also be influenced by the currency exchange rate between the Brazilian real and the U.S. dollar. The value of the Brazilian currency has fluctuated wildly in recent weeks with every news cycle concerning the potential impeachment of the Brazilian President. The Lower House of the Brazilian Congress voted on Sunday to start impeachment proceedings against President Rousseff.

The Brazilian Association of Animal protein estimates that livestock producers could import as much as 1 million tons of corn in 2016, which would be the most corn imported since the year 2000. Most of those imports would occur during the first half of 2016 before the safrinha corn would hit the market.

The window for importing corn will probably close at the end of June or the start of July when farmers start to harvest their safrinha corn crop. The safrinha corn should take care of the immediate corn deficits, but hot and dry weather in central Brazil is leading to concerns that the safrinha corn harvest could end up below current expectations. If that would turn out to be the case, Brazil may need to import more than 1 million tons of corn.

A series of vessels from Argentina is scheduled to start offloading Argentine corn at the southern Port of Rio Grande as soon as this week. Most of the corn from Argentina will be imported into southern Brazil, but some may also be imported into northeastern Brazil.