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April 21, 2016

Brazil's 8-10% Import Tariff for Corn Suspended for Six Months

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

The Brazilian government announced earlier this week a suspension of the 8-10% import tariff on corn brought in from outside of Mercosul countries. The suspension will be in place for six months and for up to 1 million tons of corn. The suspension of the import tariff is an effort by the Brazilian government to ease the very tight domestic supply of corn that has resulted in record high domestic corn prices in southern Brazil.

Brazilian farmers did not produce enough full-season corn this growing season to meet the demand of hog and poultry producers in southern Brazil. The shortage was compounded by a very aggressive corn export program driven by the devaluation of the Brazilian currency. In desperation, livestock producers in southern Brazil have turned to Argentina, Paraguay, and possibly the United States to meet their corn needs until the safrinha corn harvest starts later in June.

The first supplies of imported corn have already started arriving at ports in southern Brazil. The first vessels of corn from Argentina are arriving at the Port of Rio Grande in the state of Rio Grande do Sul and at the Port of Sao Francisco do Sul in the state of Santa Catarina. One vessel is also scheduled to arrive in the northeastern city of Recife.

Estimates are that as much as 700,000 tons of Argentine corn might be imported into Brazil which would represent the largest amount of corn imports in over 15 years. The suspension of the import tariff is expected to make U.S. corn competitive with Argentine corn in northeastern Brazil. Most of the imported corn from Argentina and Paraguay will go to the livestock industry in southern Brazil, while any potential U.S. corn imports would go into northeastern Brazil. With the suspension of the import tariff, U.S. is now competitive with Argentine corn and certainly cheaper than corn that is available in the domestic market.

While the livestock producers are eagerly awaiting the start of the safrinha corn harvest, which is Brazil's second crop of corn planted after the soybeans are harvested, there are now growing concerns that the safrinha corn production will be disappointing. The safrinha crop represents approximately two thirds of Brazil's total corn production, but hot and dry weather in central Brazil is expected to significantly lower the corn production.

The safrinha corn is the corn that goes into the export market and if the production ends up below expectations, it will impact the amount of corn available for exports later in 2016 and in early 2017. If Brazil exports less corn in 2016 compared to 2015, it could open up the possibility of more corn exports from the United States.