Cheap Brazilian corn stirs talk of rare U.S. imports

Mon Jul 9, 2012 5:37pm EDT

(Reuters) - Global corn markets were abuzz Monday with talk that U.S. livestock firms may have concluded a deal to import a record 1 million metric tons (1.1023 tons) of Brazilian corn later this year, with shipments set to arrive just as U.S. farmers would be completing their harvest.

As the worst drought in about 25 years does daily damage to what was once expected to be a record crop, speculation of the world's biggest corn exporter turning importer -- at least in some regions -- has grown.

U.S. corn prices have surged 30 percent over the past three weeks, making imports a more compelling prospect.

By Monday, some sources said a series of cargoes had been booked to arrive in the United States between October and December, some of which were believed to have been purchased by a livestock consortium that includes meat company Smithfield Foods SFD.N.

The deals could not be confirmed. Calls to Wilmington Bulk and Smithfield seeking comment were not returned.

The consortium, Wilmington Bulk, based in Wilmington, N.C., has in the past imported rare cargoes of feed wheat from the United Kingdom and soymeal from South America, to meet its needs when supplies in the United States had tightened.

"Brazil still has a reasonable corn crop so U.S. importers seem to have taken Brazilian supplies before they are sold out," said one German trader.

A trader in Mato Grosso, which supplies the bulk of Brazilian corn exports, could not confirm any sales. A broker in Parana said rumors of exports to the United States surfaced about three weeks ago but remained unconfirmed.

Brazilian corn prices were lower than those for U.S. corn to be shipped to the Southeast, trade sources said.

Brazilian corn at its Paranagua port was offered at about $274 per metric ton free-on-board (FOB) for September shipments, with an additional freight cost of about $30 per metric ton.

By comparison, U.S. corn was about $311 per metric ton, delivered to Southeast feed operations, trade sources said.

Grain imports into the United States are rare, but have almost always been for Wilmington Bulk that has in the past complained that buying grain from the Midwest sometimes cost more than imports due to inadequate rail transportation to the Southeast, hub of the country's chicken production.

The sources said the company had booked at least 2 cargoes and as many as 20, each containing some 60,000 metric tons of corn.

U.S. corn prices have surged about 30 percent over the past three weeks, nearing an all-time high of $7.99-3/4 per bushel on Monday as a severe drought decimated the crop.

The drought has hit at a time when a bumper crop was needed this fall to bolster razor-thin stocks that are projected to be the smallest in 16 years by summer's end.

"It's out of the ordinary, but it has happened before," said R.J. O'Brien analyst Rich Feltes. "It's just emblematic of how these high (U.S. corn) prices are rationing demand."

U.S. corn export dominance has eroded in recent years as rival suppliers like Brazil and Ukraine ramped up shipments to capture a larger share of the global trade.

Rivals have also gained a foothold in Asian markets that traditionally have imported U.S. corn almost exclusively.

(Reporting by Karl Plume in Chicago, Mike Hogan in Hamburg, Roberto Samora in Sao Paulo; Editing by Leslie Gevirtz)

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