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September 21, 2020

U.S. Registers Sale of 30,000 Tons of Rice to Brazil

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

Grain stocks in Brazil are very tight especially for rice, which is a staple of the Brazilian diet. The shortage has resulted in soaring rice prices in the supermarket and as a result, the Brazilian government recently temporarily suspended the 10% tariff on 400,000 tons of rice imported from non-Mercosul countries.

The U.S. announced last Thursday the sale of 30,000 tons of rice to Brazil. The last major sale of U.S. rice to Brazil was 35,500 tons in 2010. Prior to that, the last major sale was 486,000 tons in 2003. Any additional rice imports are expected to be from the U.S. or Thailand because those two countries produce the same type of rice that is consumed in Brazil.

Generally, if Brazil needs to import rice it comes from neighboring countries where there are zero tariffs, but the significant devaluation of the Brazilian currency earlier this year made rice imports more expensive, hence the need to suspend the tariff.

Rice producers in Brazil reduced their acreage in 2019/20 due to low rice prices, so the supply was tight from the start. The significant devaluation of the Brazilian currency earlier this year made Brazil's rice exports very competitive in the world market and exporters out-bid domestic users for available supplies. New crop rice supplies will not be available until next March.

The domestic demand for rice also increased significantly as a result of the stay-at-home orders to combat the pandemic. Emergency payments to the population also stimulated rice consumption. The Minister of Agriculture reported last Thursday that rice consumption in Brazil increased 15% year-on-year.

Supplies of soybeans and corn are also very tight in Brazil and there is a distinct possibility that the government may also temporarily suspend the 8% tariff on soybeans and corn until the end of the year.