Apr 14, 2010
Export Subsidizes Expected To Help Brazilian Corn Exports
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The question facing Brazilian corn producers is what they are going to do with all the corn. Once again, I think the answer is going to be that the federal government is going to help subsidize Brazilian corn exports.
Brazil started this harvest season with 11 million tons carryover of corn and Conab now estimates that Brazil will produce 54 million tons of corn. The domestic demand for corn in Brazil is estimated at 46 million tons for 2010. As a result, there is going to be a lot of corn available for export from Brazil. Conab estimates that Brazil will export 8.5 million tons of corn, but the National Association of Cereal Exporters estimate that Brazil could export up to 11 million tons of corn. Last year, Brazil exported 7.7 million tons of corn, but in 2007, Brazil exported 11 million tons. Corn exports were high in 2007 due to a drought in Europe and the fact that Brazil had non-GMO corn available for export.
The government-subsidized program for corn is two fold. First, the farmers are subsidized due to the fact that the minimum price for corn is well above the cash price offered by the market. The second part of the subsidized program is that after the government purchases the corn, it absorbs some or all of the cost to transport the corn to other parts of the country where it can be used for livestock feed or exported.
This transportation subsidize is critical because most of the increasing corn production is in the interior of Brazil in Mato Grosso and Goias where transportation costs are the highest. It could cost nearly as much to transport a sack of corn from central Mato Grosso to the Port of Paranagua as it does to purchase the corn in Mato Grosso.
There is already talk in Brazil that the government must do whatever it takes to make Brazilian corn cheaper than corn from Argentina or the U.S. in order to increase exports. The reason why this talk has surfaced is because Brazil does not have enough storage capacity for last year's corn, this year's corn, and a record soybean crop. Silos in central Brazil are already full and in fact, the new Minister of Agriculture is in the process of visiting Mato Grosso to access the storage situation. Nothing has been announced publicly as to what the government will do to increase Brazil's corn exports, but the topic is being discussed.
Even if the government does decide to do something to spur corn exports, there is still the problem of bottlenecks at the ports and the capacity of the ports to export a record amount of soybeans and corn at the same time. If they start to export a lot of corn, it is going to slow down potential soybean exports and the result could be an even more extended soybean export season in Brazil.