March 30, 2016 / 12:25 AM / 3 years ago

Brazil demand for Argentine corn seen as short-term

SAO PAULO/BUENOS AIRES, March 29 (Reuters) - After surprising grain markets this week with its biggest purchase of Argentine corn in over 15 years, traders said Brazil’s import needs were not likely to persist beyond the start of winter harvest due onstream in the second half of 2016.

For the coming few months, however, Brazil’s demand should help support corn futures prices, which have gained 5.6 percent in March to close up at $3.73 a bushel on Tuesday.

The highest corn prices since 2008 in Brazil prompted local poultry processor GTFoods to order 90,000 tonnes of Argentine corn for feed, as reported by Reuters on Monday.

This comes after a Parana state-based trader in Brazil said last week that 250,000 tonnes of Argentine corn imports were lined up for delivery through May.

The sharp decline in the Brazilian real in late 2015 unleashed record corn exports that contributed to the tight supplies on the local market.

The relaxing of Argentine grain export restrictions, after the election of President Mauricio Macri in November, also helped lay the ground work for these deals.

“It’s more of an opportunistic business than the start of a trend,” a Buenos Aires-based executive at a large grains trader said, adding however, the short-term volumes may be “important”.

Brazil’s purchases of Argentine corn in 2016 are the largest since 2001, when it imported 321,000 tonnes of corn from its neighbor, although it is a regular buyer of smaller cargoes in the region.


Brazil’s winter crop is due to start harvest in May and is forecast at a record 55.3 million tonnes due to favorable rains and increased planting. Combined with the surge in late season planting in Argentina, the two big South American harvests signal mounting pressure for prices later in the year.

Brazilian corn imports peaked between 2007 and 2009 at over 1 million tonnes annually but declined to 369,000 by 2015, Trade Ministry data showed.

Lucilio Alves, researcher at Brazilian agricultural think tank Cepea said the GTFoods deal was a “one-off” event and added the start of Brazil’s winter crop harvest in the second half of 2016 should ease local prices and put Brazil back on the export market again.

Daniele Siqueira, a grains analyst at Brazil’ AgRural, said the volume of the GTFoods deal was “surprising, and a signal that Argentina is returning” quickly to the global market.

With both the South American farming heavy weights increasingly active on the export market, it should help create resistance for corn futures prices later in the year.

Brazil shipped a record 33.4 million tonnes of corn during the eight-month period from July through February due to a sharp decline in the real against the dollar.

Brazilian corn exports have climbed steadily from 9 million tonnes in 2010 to 29 million tonnes in 2015, Trade Ministry data showed, which puts Brazil on an intercept course with U.S. corn export levels.

“In five to ten years, under normal conditions Brazil can seize the top slot,” corn specialist Paulo Molinari at analysts Safras e Mercado told Reuters.

Argentina’s Marcri ended export taxes for corn and wheat, while tossing out the quota system that the previous government used to ensure ample domestic food supplies.

This spurred Argentine farmers to expand planting more than expected and to sell corn stockpiles at a record pace onto a saturated market.

Even the U.S. farm belt, known as a leader in corn, is taking notice of the surge in exports from South America.

Wisconsin state Senator Howard Marklein recently highlighted the “headwinds” U.S. farmers faced coming from the Brazilian grain belt, which recently shipped corn to U.S. feed suppliers after the decline in the real.

“The strength of our dollar put the price of our exports at a competitive disadvantage,” the Senator said in a letter to constituents. “Brazilian corn enjoys a 40 percent price advantage compared to American corn.” (Writing by Reese Ewing; Editing by Bernard Orr)

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