December 20, 2022

 

Corn exports from Brazil set to increase

Brazil's abundant corn crop could not have come at a better time for increased exports from the largest country in South America, as the world's food supplies' remain affected by disasters from war to drought, disrupting exports from other major commodity producers, Bloomberg reported.

 

Brazil's grain exporter group Anec said Brazilian corn exports are expected to more than double this year to a record 44 million tonnes. Shipments from Brazil have increased since October, when low water levels in the Mississippi River slowed US exports.

 

Vinicius Ito, director at Marex North America in New York, said Brazil has been a saviour for the tight grains market due to the global shortage of the grain. He said Brazil, which already dominates the soybean market, is also becoming more significant in the corn market.

 

Brazil's massive crop has been crucial in keeping corn prices in check, as the world's first and fourth-largest suppliers, the US and Ukraine, both suffer from shipping bottlenecks that leave grains stranded. Since the year's peak in late April, corn futures have dropped nearly 20%, in part because of higher production in Brazil. This is good news for consumers who have been struggling with rising food prices as Russia's war has disrupted international trade patterns.

 

Brazil's abundant harvest benefits consumers, but US farmers have cause for concern. The US is losing market share to countries like Brazil, Argentina, and Ukraine, which has managed to stay among the top five nations that export the most corn. This is despite the invasion by Russia limiting exports from the Black Sea. Brazil, in contrast to the US, has space to grow even more crops.

 

Ben Buckner, chief grains analyst for AgResource Co. said what helps Brazil the most is that it can still expand its total arable land base, which can't be done in the US. He said Brazil continues to gain from lower labour costs and a depreciating currency.

 

China, the largest corn importer in the world, recently made the decision to start purchasing Brazilian corn in an effort to lessen its reliance on the US, which is the biggest illustration yet of the threat Brazil poses to US growers. In the 2020–2021 season, China made about 70% of its purchases from the US. This dominance is anticipated to decline as hundreds of Brazilian facilities have been approved for export to China.

 

Daniele Siqueira, an analyst at AgRural, said for the next three months, when grain exporters typically prioritise soybean shipments, Brazilian corn is less expensive than US corn. But Brazilian farmers can release their bounty onto the market whenever prices and currency fluctuations make it desirable for them to do so, as they still have about 19 million tonnes of the current crop to sell.

 

Brazil may export up to 47 million tonnes of goods in the coming year, which would bring it closer to the US' forecast of 52.7 million, according to the US Department of Agriculture.

 

-      Bloomberg