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August 28, 2020

If Needed, Brazil will temporarily suspend Tariffs on Soy, Corn, Rice

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian government announced earlier this week that they will temporarily suspend the import duties on soybeans, corn, and rice from countries outside of the Mercosul Trading Block starting in September. The Brazilian Minister of Agriculture stated that Brazil will not run out of these commodities before the 2020/21 harvest. She indicated that this is just a precautionary step should additional imports be needed.

The domestic supply of all three of these commodities is tight in Brazil due to increased export volumes thus far in 2020. As a result of the tight supplies, the domestic prices for soybeans, corn, and rice are at record levels or close to record levels.

Brazil has already imported 445,000 tons of soybeans from Paraguay between January 1st and August 15th, 2020. By the end of August, the imports of Paraguayan soybeans should be 500,000 tons or a little more. In all of 2019, Brazil imported 150,000 tons of soybeans from Paraguay.

There is a lot of interest in Paraguayan soybeans and farmers in Paraguay have already sold 95% of their 2019/20 soybean production. Most of the soybeans exported to Brazil are coming from the border region next to Brazil due to lower transportation costs. Paraguay is expected to export 6.5 million tons of soybeans in 2020 with 3.5 to 3.7 million tons of crush. Most of Paraguay's soybean exports flow through the export nub at Rosario, Argentina.

Brazil is also importing corn from Paraguay as well. Brazil is expected to import approximately 1.4 million tons of Paraguayan corn in 2020, which is about the same as in 2019. Nearly all of the corn imported from Paraguay is destined for livestock producers in the state of Santa Catarina.

In order to import corn from Paraguay, the state of Santa Catarina has established import protocols with Paraguay and Argentina. Argentina is part of the protocol because the corn must be trucked across a small section of Argentina before it crosses the border into western Santa Catarina.

Previously, livestock producers in Santa Catarina imported their needed corn supplies from the state of Mato Grosso in central Brazil, but northern Mato Grosso is approximately 2,000 kilometers from Santa Catarina. Since there is not a railroad connecting the two states, all the corn must move by truck. The distance from southern Paraguay to western Santa Catarina is approximately 500 kilometers, so there is a 75% saving on transportation costs if the corn is imported from Paraguay instead of Mato Grosso.