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August 31, 2016

First Vessel of Imported Corn Arrived in Brazil Last Week

The shortage of corn in the domestic market will force the livestock producers in southern and southeastern Brazil to import corn in order to keep their facilities operating. In fact, the importation has already started with the arrival of the first vessel from Argentina last Tuesday, August 23rd, carrying 27,000 tons of Argentine corn. The vessel arrived at the Port of Capuaba in the city of Victoria, which is the capital of the state of Espirto Santo in southeastern Brazil. If you are unfamiliar with Brazilian geography, Espirto Santo is the state just north of Rio de Janeiro on the Atlantic Coast.

Poultry and hog producers in the state have been operating in the red due to high domestic corn prices caused by a severe drought in central Brazil that devastated the safrinha corn crop. In order to aid the poultry and hog producers in the state, the State Legislature suspended the 8.4% ICMS tax that had been levied on corn until June 30, 2017 with the possibility that it might be extended even further. The elimination of the tax and the cheaper transportation costs of bringing in corn from Argentina was enough to justify the importation of corn.

Usually, livestock producers in the region bring in their corn supplies from Mato Grosso, Mato Grosso do Sul, or Goias, but the cost of the corn and the transportation costs became prohibitive. The cost of trucking in a sack of corn from Mato Grosso do Sul to poultry producers in the region is approximately R$ 15 per sack (approximately $2.13 per bushel), whereas the cost of transporting in corn from Argentina is approximately R$ 6.00 per sack (approximately $0.85 per bushel).

This first vessel will be able to supply the needs of the livestock producers in the region for 12-15 days. An additional vessel of corn has already been scheduled for late-September with ongoing negotiations for a third vessel scheduled for later in October.

The State Legislature is also considering eliminating the tax on soybean meal as well, which could open the door for soybean meal imports from Argentina. Argentina is the largest soybean meal exporter in the world.

I am sure this is the first of what is bound to be multiple shipments of corn, soybean meal, soybeans, and cotton into Brazil.