Brazil’s corn imports will soar five-fold to a 16-year high, thanks to the supply squeeze prompted by a disappointing safrinha crop, US officials said, cutting their harvest forecast and flagging “great challenges” for livestock farmers.
Brazil, better known as the second-ranked corn exporter, will see its imports swell from 330,000 tonnes last season to 1.5m tonnes in 2015-16, the US Department of Agriculture’s Brasilia bureau said, the kind of volumes more typically bought by the likes of Egypt, Israel or Turkey.
Imports at that level would be the biggest since 1999-2000, besides being ahead of the 1.1m tonnes that the USDA has officially forecast, and the 1.0m tonnes expected by Conab, Brazil’s own crop bureau.
The raised estimate reflected a weaker forecast for Brazilian corn production, which the bureau pegged at 75.0m tonnes, below the USDA’s official 77.5m-tonne figure, and the 76.2m tonnes expected by Conab.
More downgrades ahead?
The bureau said its production forecast, “down 12% from the previous year’s record crop”, reflected weaker expectations for the dryness tested safrinha, or second crop, harvest which accounts for some two-thirds of total output.
“An early start to the dry season [had] an adverse effect on the safrinha crop,” the bureau said, cautioning that further downgrades could be in the offing.
“Inconsistent weather patterns continue to challenge producers in corn growing regions in Brazil, and set expectations that the safrinha corn crop could be reduced by up to 10m tonnes from the previous year.”
While the bureau did not break out its own safrinha harvest forecast, Conab currently pegs the crop at 50.0m tonnes, a drop of 4.6m tonnes year on year.
Broker INTL FCStone earlier this month cut its forecast for the safrinha crop by 434,000 tonnes to 49.4m tonnes.
‘Struggling to maintain operations’
With the disappointing harvest coming on the heels of a strong corn export campaign, Brazil has been left with a “significantly-lower-than-anticipated supply” of the grain, driving port prices to some $250 a tonne on bureau estimates, equivalent to $6.35 per bushel.
US Gulf corn exports for spot sale were, according to broker Benson Quinn Commodities, on Wednesday priced at $0.54 a bushel above July futures, which closed at $3.92 ¾ a bushel.
Indeed, Brazilian poultry and pork producers are “struggling to maintain operations due to inflated feed prices”, which account for some 70% of output costs, the bureau said.
“Plants across Brazil responded to the increased input costs by cutting work shifts, enforcing mandatory vacation for employees, shutting down operations, and even prematurely slaughtering animals they are unable to continue feeding.”
Industry data shows a 10% drop in Brazilian chicken output over the past three months, while pig inseminations are down 15% – reductions reflected in a drop of 225,000 tonnes in the country’s monthly meat production.
Corn import origins
Meat producers’ struggle for feed has forced them to turn to neighbouring countries for supplies, although there are doubts as to how far these can stretch.
“While many producers are finding… relief from Paraguay and Argentina, neither country has sufficient corn to export large volumes to Brazil for an extended period of time.”
Imports from the US, the world’s top corn exporter, are complicated by Brazil’s policy on genetically modified crops, with 13-14 biotech varieties grown in the US not passed by the South American country, which operates a zero tolerance policy on traces of unapproved seed.
Meat imports to grow too?
Some livestock farmers are turning as an alternative to high-grade wheat for feed.
“Sources estimate that the meat industry has purchased 220,000 tons of bread-quality wheat since May 2016 for feed,” buying which means that “flour prices may also rise”.
However, Brazil may also see the squeeze play out in terms of higher imports of meat itself, as well as corn.
“US poultry and pork producers are cautiously optimistic for a boost in exports to Brazil.”
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