Brazil, the second biggest corn exporter after the US, signed an agreement with China on November 6, allowing Brazil to export large amounts of corn to China for the first time.

Brazil, hopes to export 10 million tonnes of corn to China, said Brazilian Agriculture Minister Antonio Andrade in Beijing on November 8. Until recently, Brazil shipped small amounts of corn to China. Out of US$5.3 billion of Brazilian corn exports in 2012, only a fraction of US$19 million went to the Chinese market.

In the past 10 years, Brazil's corn production has increased by 60%, culminating in a record 80-million-tonne crop in the 2012-13 season, which left the country with far more corn than it can use domestically.

The glut is set to take a toll if Brazil fails to direct the surplus to China. Silvio Porto, director of Brazil's Conab crop-forecasting agency, warns that failure to export corn to China may cause Brazilian exports to drop to 18 million tonnes in 2014 from 21 million tonnes this year.

Due to the expansion of hog and poultry inventories, China is expected to import a record seven million tonnes of corn in the year through September 30, according to USDA's estimates. 

However, Brazil is facing strong competition from other countries, particularly the US. As US recovers from the most severe drought in more than half a century, it is expected to reap a bumper harvest of corn, estimated to reach 14.029 billion bushels this year.

In 2011, China signed similar pacts with Argentina and Ukraine. The two countries are set to match Brazilian exports of 18 million tonnes in the current 2013/14 season, according to USDA estimates.