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Brazil corn crop losses will require contract renegotiations

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By Roberto Samora

CUIABA, Brazil, May 17 (Reuters) – Producers of winter corn in Brazil must renegotiate delivery contracts for forward sales, curtailing exports of the grain, after dry weather caused severe losses to the crop, specialists said.

Farmers will begin harvesting the winter, or second, corn crop in the coming weeks, and the heaviest losses are expected in the leading two producer states of Mato Grosso and Goias, which together account for half of the national output.

Corn crops in other states, including Minas Gerais and Mato Grosso do Sul, are also expected to suffer losses due to dryness, but Agroconsult analyst Valmir Assarice said defaults are likely to be few.

“People are very uncertain at the moment,” Assarice said, “but … in the end, the producer will fulfill his contract, either delivering the product or renegotiating (delivery).”

He said buyers of winter corn on the market were few and typically large trading companies.

“If the producer defaults, he will be put on a blacklist, and nobody will buy from him next year,” Assarice said during Agroconsult’s Rally da Safra crop tour through the grain belt.

He added, however, that a considerable number of contracts would have to be renegotiated due to the shortage of the commodity.

Luiz Nery Ribas, technical director of soybean producers association Aprosoja, said there were many types of contracts used on the market. Some of the strictest ones require payment of the value of the contract plus fines on failure to deliver.

Others only require fines, while the delivery of corn is more flexible, with producers sometimes allowed to deliver in the following crop.

The Mato Grosso agriculture federation Famato estimates the state’s producers have sold forward 63 percent of the expected crop that should start harvesting in June.

“Accounting for losses, that 63 percent sold could turn into 80 percent of the crop,” said Daniel Latorraca, superintendent of the Imea agricultural economics institute of Mato Grosso.

Analysts are already lowering their expectations for Brazil’s corn exports in the second half of 2016, as international grain merchants are likely to see better returns from selling the corn domestically than from shipping it abroad, Assarice said.

Mystery corn cargo sparks rumors Brazil is buying U.S. grain

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Mon, 25 Apr 2016 04:00:00 GMT

By Karl Plume and Gustavo Bonato

CHICAGO/SAO PAULO, April 25 (Reuters) – The grains market is abuzz with speculation that drought-hit Brazil has bought its first major cargo of U.S. corn in two decades, as the world’s third-largest corn grower scrambles to secure feedstock with no sign of the supply crisis easing.

The talk comes after Brazil, Latin America’s largest economy, last week scrapped import taxes on corn from countries outside the Mercosur trade bloc, its latest effort to curb record domestic prices and boost supplies.

Soaring exports have starved the nation’s consumers, like poultry producers, while farmers worry the prolonged dry spell could damage the upcoming crop due to be harvested in June.

Bumper prices and the duty suspension have triggered a flurry of dealmaking as the supply crunch offers traders in the region an unexpected, and unusual, new market for the world’s excess corn.

About 700,000 tonnes of corn have been booked from Argentina and Paraguay, which enjoy a tariff-free trade with Brazil under the Mercosur customs agreement.

But export sales data on Wednesday showed an undisclosed buyer had booked a 136,000-tonne U.S. corn purchase, sparking widespread speculation among grain traders that Brazil was the buyer.

If so, the world’s No. 2 corn exporter would be reaching beyond its traditional suppliers Argentina and Paraguay in what would be the nation’s largest U.S. corn purchase since 1995. (nL3N17O4D6)

The dealmaking underscores how the growing crisis in Brazil is upending regional trade flows and forcing buyers to extend their search for alternative supplies.

Marden Vasconcelos, vice president of local poultry association Aceav, said he was offered containers of corn from a major U.S. merchant.

“I was surprised, because I always thought the shipping price of a container would be higher, but it opens up another possibility for our imports,” he said.

U.S. Department of Agriculture export inspections data may reveal the destination as soon as Monday, though traders said the disclosure would more likely come later as shippers may need more time to finalize the details of the transaction before physically loading a vessel.

FIRST IN 20 YEARS

As much as 700,000 tonnes of U.S. corn could get shipped to Brazil over the next few months before its next crop is harvested, traders estimated.

That’s tiny compared with the tens of million of tonnes the United States and Brazil, the world’s top corn exporters, ship abroad each year and the 122 million tonnes in annual global corn trade.

But it’s far in excess of U.S. volumes heading to Brazil over the past 20 years, Brazilian government data shows.

Early calculations indicate U.S. corn is competitive with Argentine material because of the vast oversupply and ocean freight rates are at historic lows.

Tariff-free bulk shipments from the U.S. Gulf Coast to northeast Brazil, where several smaller poultry producers are located, are estimated to be about $6 per tonne cheaper than Argentine imports and at least $35 per tonne less than domestic corn, Reuters and industry data showed.

“We were closing the deal for the third Argentine ship when we heard about the tax cut. We decided to wait and see how the prices go,” said Vasconcelos.

The unusual trade route has been a challenge even for experienced U.S. merchants and Brazilian buyers, who must ensure grain has all regulatory clearances and does not contain unapproved biotech varieties, grain traders said.

Importing an entire ship loaded with corn is the kind of business only a handful of local poultry producers can handle, so smaller amounts arriving by containers can be an alternative, specialists said.

Smaller buyers in northeast Brazil, home to most of the region’s poultry farms, are used to buying only domestic grain from familiar suppliers, which can further complicate the process, they said.

“There’s a lot of corn here in the U.S. and if it makes sense ecomonically let them bring it,” said Pedro Dejneka, president of consultancy AGR Brasil in Chicago.

(Editing by Josephine Mason and Cynthia Osterman)

Brazil may return to buying corn soon due to dry spell

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Mon, 18 Apr 2016 16:03:41 GMT

By Reese Ewing and Roberto Samora

SAO PAULO, April 18 (Reuters) – Brazilian corn imports have dropped back after surging to their highest levels in a decade recently, but the country could return to buying soon, with U.S. corn potentially on the menu, if a dry spell hitting the local winter crop persists.

Analysts and livestock industry leaders expect Brazil’s

second and larger winter corn crop that begins harvesting around mid-year to boost supplies, but these forecasts have not considered that drought may cause significant crop losses.

Meteorologist Marcos Antonio dos Santos at weather service Somar is forecasting essentially that, in his latest outlook for main center-west grain belt known as the Cerrado and the Matopiba region.

“I don’t like to bear bad news but it should be said: It’s going to stress the winter corn crop a lot,” Santos said, adding that high temperatures will intensify and isolated showers willbecome sparser over the next 10 days, with no relief in sight.

Many corn fields are not yet in critical condition in the main growing regions, even though they are under stress.

Laercio Claus, agronomist at the DGF farming group in north central Mato Grosso, said some of his 2,300 hectare (5,680 acre) winter corn crop was stressed by the dry weather.

“We will definitely need more rain to finish the crop, which is forming ears and kernels,” Claus said, adding that the farm’s corn goes to feed the local pork and poultry.

Corn producers have shied away from fresh forward sales of the maturing crop due to their uncertainty about the output of harvest.

“Prices are high, but there are no deals. Nobody is confident about how much they will actually harvest,” said Arlindo Cancian, president of the farm association in Canarana, on the grain-rich eastern slope of Mato Grosso state.

U.S. CORN

The bulk of the 500,000 tonnes of corn that will arrive at Brazilian ports in the coming two months was originated in Argentina and Paraguay, which enjoy a tariff-free grain trade with Brazil under the Mercosur customs agreement.

The Agriculture Ministry recently requested the suspension of a 10-percent common import tariff applied to non-Mercosur grain imports to ease price pressures on food and animal feeds.

Local analyst INTL FCStone said such a move would make U.S. corn competitive, especially those in the northeast that are close to the U.S. Gulf region and far from Argentina.

“The Northeast doesn’t have enough corn and the price for corn (locally) is well above normal,” Ana Luiza Lodi at FCStone said, adding that a 60-kg bag is currently quoted at 54 reais ($260/tonne), up 56 percent from a year ago in the region.

Including freight costs, U.S. corn could reach Northeast Brazil at roughly $190 a tonne if the import tariff were suspended, she said. The government’s foreign trade council,Camex,is due to consider the tariff reduction on Tuesday.

(Writing by Reese Ewing; Editing by Frances Kerry)

(( reese.ewing@thomsonreuters.com; +5511 5644 7721; Reuters Messaging: reese.ewing.thomsonreuters@thomsonreuters.net) )

Brazil political crisis hits grains trade

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Reuters | By Marcelo Teixeira

SAO PAULO, April 13 (Reuters) – Brazil’s forward sales of commodities such as grains and sugar have nearly ground to a halt as producers, trading companies and consultants assess the impact of the possible impeachment of President Dilma Rousseff.

After a year-long boom in sugar and corn exports, commodity merchants and farmers are bracing for continued strengthening of the real if Rousseff is ousted, reducing the price advantage of Brazilian commodities and possibly curbing foreign sales.

The Brazilian currency has rallied in recent weeks, despite a deep economic crisis, amid investors’ hopes the left-leaning Rousseff will be replaced by a more business-friendly administration.

“Sellers and buyers are basically just waiting to see what is going to happen,” said Fabio Meneghin, senior analyst at Agroconsult, a leading Brazilian consultancy. “Except for spot deals, there is not much going on.”

Meneghin said that prices for a large share of forward deals for Brazilian grain were usually set on delivery, adjusted for fluctuations on the Chicago Board of Trade (CBOT) and in the local real currency.

“Obviously nobody wants to take that kind of risk right now,” he said.

Brokerage and consultancy firm INTL FCStone said in a report on Wednesday that a change of government in Brazil, with market-friendly Vice-President Michel Temer taking over, would lift the real to 3.10 to the dollar, compared to 3.54 currently.

The firm said if the impeachment is rejected and Rousseff stays on, the real could fall to 4.10 to the dollar, increasing the price advantage of Brazilian exports.

For soybeans, FCStone says total exports this year could fall from the current estimate of 54 million tonnes to 50 million tonnes if the government changes and the real appreciates, shifting some buying to the United States.

In the alternative scenario, Brazil could export as much as 56 million tonnes.

For sugar, FCStone says impeachment could reduce the sweetener’s profitability in export deals, encouraging local mills to increase ethanol production to sell the fuel locally.

The brokerage also said an ousting of Rousseff would boost the current trend of corn imports, since foreign shipments would become cheaper for Brazilian pork and poultry producers that are suffering from tight local supplies of corn.

Agroconsult’s Meneghin also said producers are worried the political crisis will freeze the process of setting the next crop financing package – usually announced around May or June – as the government is completely absorbed with fighting the impeachment process.

The last package for the 2015-2016 season was more restrictive, with higher interest rates.

Brazil’s lower house is expected to vote on Sunday on whether she should be tried in the Senate over accusations she broke budget laws. Should two thirds of the lower house vote in favor of impeachment, the process would go to the Senate and Rousseff would be suspended while she faced trial, with Temer taking her place. (nL2N17G1ZY)

Tarcilio Rodrigues, head broker at Sao Paulo-based Bioagência, expects a currency swing to have limited impact on some commodities, such as sugar.

“At least 80 percent of the exportable surplus has been sold and hedged with sugar futures and currency contracts, essentially fixing the mills’ price for sugar this year”, he said.

A similar situation happened with soy and corn, with producers taking maximum advantage of the real’s slump in 2015 to export record volumes.

Although potentially losing out on expected currency movement if Rousseff’s impeachment is approved, many producers support the ousting.

The National Agricultural Confederation (CNA) is organizing a tractor ‘invasion’ of the capital Brasilia on Sunday to pressure congressman to vote for impeachment.

Famato, an entity representing producers in top grains state Mato Grosso, said they fear a continuing deterioration of the economy if Rousseff stays, it says.

(Additional reporting by Reese Ewing; Editing by Andrew Hay)

(( marcelo.teixeira@thomsonreuters.com; 5511 5644 7707; Reuters Messaging: marcelo.teixeira.thomsonreuters.com@reuters.net) )