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April 19, 2021

Brazil's End Users Importing Corn, More Imports to Come

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

It was announced last week that Brazilian companies are importing corn from Argentina and now there are indications that numerous end users in Brazil are actively looking at importing corn for their livestock operations.

Brazil's Minister of Foreign Commerce and Services (MDIC) indicated that during the first three months of 2021, corn imports are up 90% compared to a year earlier.

The Brazilian company BRF, which is Brazil's largest poultry processor, announced last week that they have purchased some shipments of corn from Argentina and Paraguay in order to maintain their poultry operations and to control costs.

Domestic corn prices in Brazil are at record high levels due to very tight supplies and concerns about dry weather impacting the safrinha corn crop in south-central Brazil. On the B3 Exchange in Sao Paulo, future corn prices last week were above R$ 100 per sack (approximately $8.25 per bushel). Domestic corn prices in Brazil are double those of a year earlier.

The safrinha corn crop in Brazil accounts for approximately three quarters of Brazil's total corn production and the safrinha corn planting was very delayed this year due to the delayed soybean harvest. In many areas, the safrinha corn was planted a month or more later than normal and the late planted corn is now confronting what looks like an early end to the summer rainy season.

BRF is not the only company interested in importing corn into southern Brazil. According to Ricardo Santin, President of the Brazilian Animal Protein Association (ABPA), in an interview with Bloomberg, five more Brazilian companies intend to import corn. ABPA has also asked the Brazilian government to extend the exemption on import tariffs for grain imported from countries outside the Mercosul trading block. The exemption on the 8% import tariff expired at the end of March, but the corn supply situation in Brazil has gotten worse since then.

The livestock industry in southern Brazil always has a corn supply deficit. Most of the needed corn supplies are trucked in from Mato Grosso at a very high transportation cost. Major producing areas in Mato Grosso are as much as 1,500 kilometers away from livestock producers in southern Brazil. There is no rail connection between the two areas, so all the corn must be trucked in.

Corn in Paraguay and Argentina is produced in a much closer proximity to southern Brazil, so transportation costs are lower. Corn produced in southeastern Paraguay only needs to be transported about 500 kilometers to reach livestock producers in the state of Santa Catarina, which is Brazil's largest hog producing state.