Brazil's Corn Imports Surge as Domestic Prices Rise

Brazil's corn imports for the 2015/16 trade year (Oct-Sep basis) are forecast at 1.7 million tons, the highest total in 16 years. The unusual import level is attributable to a convergence of dynamics. Stimulated by the depreciation of the currency and abundant supplies, Brazil exported at a rapid pace at the end of 2015 and the start of 2016. As a result, inventories were substantially reduced. Then came a shortfall in the second (safrinha) crop, which has typically accounted for about two-thirds of Brazil's production in the last few years. With supplies tightening in the last few months, domestic prices surged and remain well above the level of a year ago.

Imports are expected to remain strong through early 2016/17 as supplies are likely to be tight. So far, Brazil's corn imports have been exclusively from Mercosur countries, specifically Argentina and Paraguay. However, in an effort to tame prices, Brazil has removed the Common External Tariff for non-Mercosur countries until November. While U.S. export prices are competitive globally, Brazil has not imported from the United States based on restrictions on genetically modified (GM) corn. One GM variety has been recently approved, but more approvals will be needed before U.S. corn can be imported.

OVERVIEW

For 2016/17, global corn production is lowered from last month with reductions for China, the EU, and the United States more than offsetting gains for Brazil and Canada. U.S. production is forecast down with lower yield. Global trade is projected higher with larger imports primarily for China. Forecast exports are raised for Argentina and Brazil. The U.S. season-average farm price is forecast 5 cents higher to $3.20 per bushel at the midpoint.

For 2015/16, global corn production is lower as a reduction for Brazil more than offsets an increase for Mexico. Trade is up with larger imports for Iran, Vietnam, and Canada. Exports are raised for Argentina, Brazil, and Thailand. The U.S. season-average farm price is unchanged at $3.60 per bushel.

PRICES

Since the release of the August WASDE report, FOB quotes for Brazil are up $2 to $192 per ton. However, quotes for other major exporters have dropped, influenced by prospects for large supplies. Argentina's quotes are down $9 to $172 per ton, while Black Sea quotes are down $3 to $195 per ton. U.S. quotes fell $3 to $165 per ton with a record yield forecast in August. On an FOB basis, U.S. corn is the most competitive relative to other exporters.

TRADE CHANGES IN 2016/17

Selected Exporters

  • Argentine corn is up 1.5 million tons to 25.0 million with the expectation of rising global demand and competitive prices. Barley is up 200,000 tons to 2.1 million on larger projected supplies.
  • Brazilian corn is up 500,000 tons to 20.0 million based on a larger forecast crop.
  • Canadian corn is up 100,000 tons to 600,000 on larger production. Barley is also up 200,000 tons to 1.6 million on a larger crop. Oats are down 200,000 tons to 1.5 million on a smaller crop.
  • Australian barley is boosted 500,000 tons to 6.7 million with a larger projected crop and reduced competition.
  • EU barley is cut 1.5 million tons to 6.5 million on a reduced crop.
  • Kazakhstani barley is cut 200,000 tons to 700,000 on a smaller crop.
  • Russian barley is down 400,000 tons to 4.4 million on a smaller crop.
  • Ukrainian barley is raised 500,000 tons to 5.0 million on reduced competition.

Selected Importers

  • Chinese corn is boosted 2.0 million tons to 3.0 million to offset a smaller projected crop. Trade by non-state importers is expected higher. Barley, however, is cut 1.0 million tons to 5.0 million reflecting a slowdown in demand.
  • Lebanese corn is raised 100,000 tons to 800,000 on expected steady demand.
  • Jordanian barley is cut 100,000 tons to 900,000 reflecting reduced supplies in key suppling countries.
  • Saudi Arabian barley is up 500,000 tons to 10.5 million on expected steady demand.
  • U.S. oats are reduced 100,000 tons to 1.5 million reflecting smaller supplies in Canada, the major supplier.

TRADE CHANGES IN 2015/16

Selected Exporters – based on trade data

  • Argentine corn is raised 1.5 million tons to 20.5 million.
  • Brazilian corn is raised 500,000 tons to 33.5 million.
  • Indian corn is raised 100,000 tons to 450,000.
  • Serbian corn is down 100,000 tons to 1.6 million.
  • Thai corn is up 300,000 tons to 450,000.
  • Russian barley is cut 100,000 tons to 3.7 million.
  • Ukrainian barley is boosted 500,000 tons to 4.7 million.
  • U.S. sorghum is up 150,000 tons to 8.4 million.

Selected Importers – based on trade data

  • Brazilian corn is down 100,000 tons to 1.7 million.
  • Canadian corn is boosted 200,000 tons to 1.2 million.
  • Iranian corn is boosted 400,000 tons to 5.9 million.
  • Iraqi corn is up 130,000 tons to 330,000.
  • Lebanese corn is boosted 150,000 tons to 850,000.
  • Chinese sorghum is boosted 200,000 tons to 7.4 million, while barley is cut 800,000 tons to 6.2 million.
  • Saudi Arabian barley is up 900,000 tons to 10.7 million. Corn imports are also up 100,000 tons to 3.6 million.
  • Vietnamese corn is up 300,000 tons to 7.2 million.