September 14, 2007

 

EU's anti-GM policy spurs hike on Brazil's corn exports

 

 

Europe's policy on genetically modified (GM) corn is one of a handful of factors contributing to Brazil's corn export boom, analysts said Wednesday (September 12).

 

The European Union, which uses corn to feed animals as well as people, has banned a number of transgenic corn varieties. Those bans make it hard for the EU to import corn from the US, the world's leading corn producer and a big grower of transgenic corn. They make Brazil attractive to EU importers, because transgenic corn is still against the law here.

 

"Europe's position on genetically modified organisms (GMO) is helping Brazil," said Steve Cachia, a commodities analyst at brokerage firm Cerealpar.

 

Europe's well-known anti-GMO stance isn't the only thing helping Brazil on its way to possibly hitting a record 10 million tonnes in corn exports during the calendar year.

 

Europe's corn crop suffered from dry weather and is expected to end around 47 million tonnes, down from 55 million tonnes in the previous season's crop, Cachia said.

 

Aside from Europe's influence on the Brazilian corn market, an excess of local supply, high international corn prices and a government subsidy awarded to producers who export have all contributed to Brazil's corn exports this year.

 

"We estimated a 6-million-tonne export year, then 7, then 8, now its close to 9 (million tonnes)," said Andre Debastiani, a commodities specialist at consulting firm Agroconsult.

 

"Government subsidies and high supply are a major factor in all of this, but Europe's demand for traditional corn has been a big boost these past few months," Debastiani said.

 

From January to August, Brazil exported around 5.5 million tonnes of corn. Of the total, 2.7 million tonnes were shipped to Iran, traditionally Brazil's leading market. EU nations imported 2.1 million tonnes.

 

"We are one of the only games in town for non-GMO corn, and the Europeans are willing to pay extra for it," said Eduardo Sarmento, an analyst at consulting firm Safras & Mercado. Sarmento and Cachia said European buyers are paying upwards of US$70 per tonne over the going market rate of around US$120 per tonne.

 

In Portugal, for example, Brazilian corn imports doubled to 137,000 tonnes in July from June. Iran imported 812,000 tonnes in July, up from 400,000 tonnes in June, according to Safras & Mercado.

 

"The main question is going to be whether Brazil can sustain the EU market once we start planting transgenic corn," Debastiani said.

 

The national biosafety agency, CTNBio, permitted the planting of Bayer CropScience's LibertyLink corn, but a Parana state judge challenged the decision. Further study on LibertyLink is being done at the agency before it can be released to the market. Parana is Brazil's leading corn-growing state.

 

"One day, though, the EU will approve of more transgenic varieties. This export boom could be a blip on the radar right now," Cachia said.

 

"Traders are getting calls to close export contracts for March onward and that is very rare in Brazil," he said.

Brazil starts planting corn this month for the 2007/08 season.

 

Corn is Brazil's No. 2 crop behind soybeans.