June 7, 2012

Brazil Poised to Export Corn to China

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

Brazilian and Chinese officials are set to finalize a protocol during the upcoming Rio+20 United Nations meeting that would allow Brazilian corn to be exported to China. The protocol will lay out the details of how the risks of diseases, weed seed, insects, etc. will be monitored and controlled. A Chinese delegation visited Brazil in March to evaluate the Brazilian corn production and transportation system and to formally present their proposal.

China's desire to import corn from Brazil is part of country's overall plan to diversify the sources of raw materials that they need for their expanding economy. The Brazilian protocol is coming shortly after similar discussions were held in Argentina. China has the largest hog herd in the world and the increased demand for protein is outstripping the country's potential to produce enough feed rations for its livestock industry. China is already the largest importer of soybeans in the world and until a few years ago, they were a net exporter of corn. China started to import small amounts of corn two years ago, but corn imports are now increasing at a much faster pace. In 2011 they imported 5 million tons and that is expected to increase to 7 million in 2012.

The increased Chinese demand for corn is coinciding with an increase in corn production in Brazil. The 2011/12 safrinha corn crop in Brazil is expected to set new all-time record production. This second crop of corn, which is planted after a first crop of soybeans, is now nearly half of Brazil's total corn crop. The safrinha corn is generally planted in February and March and harvested in June and July. Brazil experienced an extended rainy season this year and the safrinha crop is expected to do very well in central Brazil, but it might be impacted by frost in southern Brazil later this week.

Much of the 2011/12 safrinha corn crop will move into the export markets starting in July. Conab is estimating that Brazil will export 11 million tons of corn in 2012 and the USDA is estimating that they will export 12 million tons. China is already the number one destination for Brazilian soybean exports and it could assume the lead for corn exports as well in the coming years.