July 4, 2006

 

Brazil's corn market booms on Iranian demand

 

 

Brazil's corn market has been booming all year due to strong demand from Iran.

 

June export volume rose to 346,200 tonnes compared with 296,600 tonnes in May, and way ahead of the 3,200 tonnes shipped in June 2005, according to Brazil's Foreign Trade Ministry's monthly trade figures, released Monday (Jul 3).

 

"Iran is to thank for these numbers. About 80 percent of our corn is going there because they are no longer buying from the US. They say it is because they do not want to buy transgenic corn, so they turned to Brazil," said Fabio Meneghin, a grain market analyst at Agroconsult, an agribusiness consultancy.

 

Iran imports corn to crush for corn meal, an animal feed.

 

Meneghin says Brazil should export 1.5 million tonnes of corn in 2006, roughly 500,000 tonnes more than it exported in 2005.

 

Government subsidy increases this year have also facilitated export sales, Meneghin said. The government became more aggressive with its price guarantee programmes this year out of concerns that debts and income losses by soy, corn and other oilseed producers would lead to government loan defaults, export losses and other local economic crises without federal support.

 

Brazil is not a major corn exporter. In 2000 and 2003, Brazil shipped roughly 5 million tonnes of corn internationally, but low local prices and an unfavourable foreign exchange between the Brazilian real and US dollar made Brazil less competitive in the corn trade.

 

Corn is Brazil's no. 2 planted farm commodity in both volume and acreage, following soybeans, according to the Agriculture Ministry. Brazil should harvest 40.6 million tonnes of corn in the 2005/06 season, compared with 38.9 million tonnes in the 2004/05 crop year, Meneghin said.

 

Brazil exported 860,000 tonnes of corn since January, according to Agroconsult.