October 30, 2008

Brazil's 2007-08 corn export is forecast to slow down to 9 million tonnes due to strong domestic demand, according to USDA.

Despite June's hard frosts in the southern state of Parana, Brazil is expected to have a record corn crop of 57.5 million tonnes in 2007-08. Despite high international corn prices, area is expected to increase minimally in the coming year, with any expansion occurring in the "safrinha" (second) crop. Last year, Brazil appears to have found its current equilibrium for area planted to particular crops, and no strong shifts between crops are expected.

Even though international prices have increased significantly, so has the cost of production. The average cost of transportation has increased 50 percent in the last year, and according to some accounts, the cost of production has doubled, with the majority of this increase due to the rising price of fertilizers. In addition, strong environmental restrictions and the need for consistent environmental regulations and strong property rights further restrict such expansion.

Post has lowered its 2007/08 marketing year (March 2008/February 2009) export forecast to 9 million tonnes, primarily due to the current strong domestic demand which is diverting corn from export channels and resulting in some contracts being canceled. Last year, the domestic poultry and pork producers were caught by surprise by the strong surge in corn exports, and now they are willing to pay the price to ensure they have the inputs they need. However, Brazil could export more if the international demand were to increase substantially.