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December 4, 2019

Record Corn Exports Could Result in Corn Shortages in Brazil

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

The state of Santa Catarina in southern Brazil is a major livestock producing state, but livestock producers in the state are worried about rising domestic corn prices. The state will have a corn deficit of approximately 4.5 million tons of corn in 2020, which will require imports from other states in Brazil and/or from neighboring Paraguay and Argentina.

The Agriculture and Livestock Federation of Santa Catarina (Faesc) indicated that livestock producers in the state will face corn shortages and higher prices in 2020. The president of Faesc attributes the corn shortage to very tight available supplies, strong domestic demand for corn, surging exports, and a weaker Brazilian currency.

Brazilian corn exports in 2019 could set a new record of 41 million tons due to a weaker Brazilian currency, which is currently trading at about 4.2 reals per dollar. The strong domestic demand is coming from two sources, livestock producers and ethanol producers.

Meat exports continue to increase mainly due to the strong demand for animal protein from China. In fact, live cattle prices are record high in Brazil and in some cases, 50% higher than at the start of 2019. The demand for corn for ethanol production is expected to be as high as 5 million tons in 2020. Most of the corn-based ethanol production is in the center-west region of Brazil, which is also the main source of corn imports into Santa Catarina,

Aggravating the situation even more is the fact that farmers in Santa Catarina have been reducing their corn acreage for most of the past decade in favor of greater soybean production.

The 2020 corn deficit in Santa Catarina is expected to be 4.5 million tons with most of the imported corn coming from the states of Matos Grosso, Mato Grosso do Sul, and Parana. The president of Faesc also expects increased corn imports from neighboring Paraguay and Argentina. The state of Santa Catarina recently reached an agreement with Paraguay and Argentina for the importation of corn from both countries.

The biggest impact from the corn deficit is expected to be on small and independent livestock producers who have less wherewithal to withstand higher feed costs. The Vice President of Faesc indicated that he started to become very concerned in August when Brazil exported 7 million tons of corn in one month. The fear is now that local corn prices in Santa Catarina could reach R$ 50 per sack or approximately $5.50 per bushel.

Another corn deficit region of Brazil is northeastern Brazil and it is possible that Brazil might even import a little corn from the United States into northeastern Brazil due to the high cost of transporting corn from distant regions of Brazil.