Apr 22, 2010
Brazil Needs To Increase Corn Exports, The Question Is How
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
With the harvest of the large full-season corn crop nearly complete and a potentially record safrinha corn crop on the way, officials with the Ministry of Agriculture are wondering what they are going to do with all the corn accumulating in Brazilian storage bins. The oversupply of corn in Brazil continues to pressure domestic corn prices to below the cost of production and a strengthening Brazilian currency is hampering corn exports.
One way out of this dilemma is to export more corn in order to draw down stocks, but the export pace thus far during 2010 has been lagging. During the first three months of 2010, Brazil exported 2.5 million tons of corn, which is 30% less than what was exported during the first three months of 2009. The Ministry of Agriculture estimates that Brazil will need to export 10 million tons of corn in 2010 in order to keep prices from falling even further. To meet the goal of 10 million tons of exports, Brazil would need to export approximately one million tons of corn each month for the remainder of 2010. That may be hard to do considering that the best month for exports thus far, which was January, only 900,000 tons of corn was exported from Brazil.
Another problem for Brazilian exporters is the strengthening Brazilian currency. It is currently trading at 1.75:1 compared to the dollar, but it would be even stronger were it not for nearly daily intervention from the Central Bank in an attempt to keep it from over strengthening. It is assumed that the Brazilian government will need to subsidize corn exports in order to keep the crop from being over priced in the international market.
Regardless of prices and currency considerations, the fact is that Brazilian ports may not have the physical capacity to ship a record soybean crop and 10 million tons of corn at the same time. During January, when Brazil exported 900,000 tons of corn, very few soybeans were moving through the ports. During the remainder of 2010, Brazilian exporters will be pressing to move the record soybean crop through their facilities and their ability to ship a near record amount of corn at the same time may not be physically possible.
The Brazilian government announced that it intends to purchase 15 million tons of corn from farmers in 2010, which is significantly higher than the 10.8 million tons it purchased in 2009. Even with these purchases, the amount of corn carry over in Brazil is expected to top 11 million tons (three months of domestic consumption) for the third straight year in a row.
Brazil's highest ever corn exports occurred in 2006-07 when the country exported 10.9 million tons of corn. Exports surged that year due to drought-reduced corn and wheat production in Europe and the fact that Brazil was the primary source of non-GMO corn in the world. During the following year when European corn stocks recovered, Brazil's corn exports fell by nearly 50%.