October 22, 2020

Domestic Corn Prices in Brazil Approach Parity with Imported Corn

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

Prices of corn on the B3 Brazilian Exchange continue to soar as high as R$ 83.00 per sack (approximately $6.98 per bushel), which is approaching parity with potential corn imports from the United States. In fact, the corn futures price at the B3 exchange surpassed R$ 80.00 per sack for November 2020, January 2021, and March of 2021 (approximately $6.75 per bushel).

It is estimated that with the suspension of the 8% tariff for corn imported from non-Mercosul countries, corn from the U.S. could arrive at Brazilian ports for about R$ 76.00 per sack (approximately $6.40 per bushel). Even with corn prices approaching parity, it is still unclear if Brazil will import corn from the United States due to the currency exchange rates, logistical problems, and concerns over approved GMO corn hybrids. But one thing is clear, the domestic corn prices in Brazil are approaching levels that would make corn imports feasible.

Corn supplies in Brazil are extremely tight and feed manufactures are having difficulty sourcing corn for the next several months including into January. Brazilian farmers are well capitalized and if they still have corn to sell, they are holding tight in anticipation of even higher spot prices.

For example, Mato Grosso is the largest corn producing state in Brazil and the Mato Grosso Institute of Agricultural Economics (Imea) reported that the corn stocks in the state will remain extremely tight for 2020/21, just like they were for 2019/20. Corn prices in the state are already at record high levels, and they are expected to stay high at least until mid-2021 when the new safrinha corn crop becomes available.

Imea estimates that the supply of corn in Mato Grosso will increase 2.3% in 2020/21 due to increased acreage. The state produced 35.45 million tons of corn in 2019/20. In 2020/21, Imea is estimating that corn exports will be 21.26 million tons and the domestic demand will be 15.04 million tons for a total demand of 36.3 million tons. If those estimates turn out to be accurate, the 2020/21 carryover in the state would be only 0.02 million tons, which is equal to the 2019/20 carryover.

Corn producers in Mato Grosso are facing a 7.75% increase in the cost of production due to higher prices for imported fertilizers, fungicides, and herbicides, all of which are costing more due to the devaluation of the Brazilian currency compared to the U.S. dollar.