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October 19, 2020

Brazil Set to Suspend Import Tariffs on Soybeans and Corn

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

The Brazilian government proposed last Saturday that the 8% tariff on corn and soybeans imported from non-Mercosul countries should be suspended in an effort to fight food inflation. The decision to suspend the tariffs was made last Friday when the Minister of Agriculture met with the Economic Minister. The final vote on the measure is expected before October 20th.

The suspension of the tariff on soybeans and soybean products would stay in effect until January 15, 2021. The suspension of the tariff on corn would stay in effect until March 31, 2021. Livestock producers asked the Minister of Agriculture in August for the suspension and she indicated that the proposal was being studied. Hog and poultry producers asked again in September for the suspension because domestic soybean and corn prices were at record levels in Brazil and soybean meal and corn are the main ingredients in animal rations.

At the start of September, the government suspended the tariff on 400,000 tons rice imported from non-Mercosul countries until end of the year. The government was forced to act when the price of rice in the supermarkets more than doubled. Earlier in the year, a five kilogram bag of rice was selling for R$ 15.00, but the price skyrocketed to as much as R$ 40.00 per bag in some markets.

The high prices were the result of a rice shortage caused by two factors. First, a steep devaluation of the Brazilian currency earlier this year led to a big increase in rice exports. Second, the pandemic also led to increased domestic consumption of rice. Since rice is a staple of the Brazilian diet, the high prices led to widespread consumer complaints forcing the government to act. The 2020/21 rice crop in Brazil will be harvested starting next March and until then, the rice imports are expected to stabilize rice prices in the Brazilian supermarkets.

Soybean and corn supplies are very tight in Brazil, which has resulted in record high domestic soybean and corn prices. Soybean prices hit R$ 159.88 per sack at the Port of Paranagua (approximately $13.45 per bushel) on October 8 and corn price had already set a record high of R$ 70.30 per sack (approximately $5.91 per bushel). The devaluation of the Brazilian currency favored exports and now the domestic supplies of the two grains are extremely short. The government is hoping that imports of soybeans and corn will help to push down domestic prices.

Harvesting of the full-season corn will start in January, but that crop only accounts for about a quarter of Brazil's total corn production. Three quarters of Brazil's corn will be produced as the safrinha crop which will be harvested next June and July. The new crop soybeans will be available starting next February. Almost all the soybeans and corn imported thus far into Brazil have come from neighboring Paraguay, but their supply is nearly exhausted.