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.
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