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April 8, 2013

Brazil to Import Argentine Corn into Northeastern Brazil

The Brazilian government announced late last week that they would be importing corn from Argentina and delivering it to ports in northeastern Brazil for distribution to small livestock producers in northeastern Brazil. The government is taking this action in spite of the fact that Brazil may produce a record large corn crop in 2012/13.

Conab will be conducting the operation in order to fulfill a promise made by President Rousseff to help small livestock producers in northeastern Brazil who continue to suffer in the grip of a multi-year severe drought. She promised that 340,000 tons of corn would be transported into the region between the months of April and May and that it would be sold to small livestock producers for R$ 18.12 per sack of 60 kilograms or about $4.10 a bushel. That is about the same price that it would cost to purchase the corn in Mato Grosso not counting the cost of transporting it to northeastern Brazil. A farmer wishing to purchase the corn will be limited to 6,000 kilograms.

The government is going to import the corn because there are not enough trucks available in Brazil to transport that much corn in that short of a period. Brazil is in the midst of harvesting a record large soybean crop and most of the grain-hauling trucks in Brazil are transporting the soybean crop to export facilities in southern Brazil. Only a small percentage of the corn promised to the farmers in the region will be imported from Argentina and the majority will still be brought in by truck from other regions of Brazil.

The problem of course is the high cost of trucking corn from Mato Grosso or southern Brazil into northeastern Brazil. Trucking corn from Mato Grosso to export facilities is extremely expensive, but at least many of the trucks can back-haul fertilizers or other products to help defray the high costs. When trucks transport corn from Mato Grosso to northeastern Brazil, there is nothing to back-haul, so they must return empty, which drives the costs even higher. As a point of orientation, the distance from central Mato Grosso to northeastern Brazil is about 1,500 miles or the equivalent of from Minneapolis, Minnesota to Orlando, Florida.

Northeastern Brazil has a semi-arid climate and undergoes periodic droughts on a regular basis, but the current drought has been one of the worst in the last fifty years. Summertime rains this growing season in northeastern Brazil were light and scattered and with the return of the dry season, the next chance for significant moisture won't be until late in 2013.