May 25, 2016 / 9:31 PM / 3 years ago

Brazil's corn crisis could boost rivals as exports seen sinking

SAO PAULO (Reuters) - Brazil will export less corn than expected this year as the supply crisis in the world’s No. 2 exporter deepens, giving rival producers a rare chance to boost sales abroad amid a global glut weighing on world prices, a Reuters poll showed.

Expectations for Brazil’s corn exports in the commercial year that started in February have fallen to 26.1 million tonnes, down from 28.9 million tonnes in a Reuters’ poll in November, the survey showed.

That would mark a steep decline from 30.2 million in exports the prior year and is also much lower than the Agriculture Ministry’s estimate in April of 30.4 million tonnes, which would be a record for a second straight year.

While the forecasts are above historic averages, the survey illustrates how soaring local prices and a rush for feedstock by domestic poultry and pig farmers have quickly slowed the record pace of exports.

Brazil’s preliminary customs data indicate May exports will be as low as 2,000 tonnes, the second smallest on record. Imports from neighboring Argentina have ramped up.

Slackening exports will provide some relief to Brazil’s rivals as the global surplus swells and world prices remain under pressure. U.S. merchants and farmers have struggled to compete against lower-priced South American corn.

While U.S. corn is still top choice for the world’s top corn buyer, Japan, a prolonged tightness would offer Brazil’s smaller rivals, Argentina and Ukraine, a chance to grab market share, traders said.

“If Brazil has problems with supplies in October, then Japan will switch to Argentina and Ukraine,” said Nobuyuki Chino, a Tokyo-based veteran grains trader.

Southeast Asian corn buyers, such as Vietnam and Malaysia, have been taking much of their supplies from Brazil over the past several years, but may switch to United States if supplies continue to tighten, traders said.

RECORD EXPORTS

Last year, Brazilian corn exports hit a record, propelled by a record harvest and a collapse in the real against the dollar, causing an unexpected domestic shortage.

Now, worries are mounting that dry weather in Mato Grosso, the main producer state, and in Goias has damaged the winter crop, prolonging the crisis. That would fuel an extended price rally and force end-users to find alternative supplies further afield.

Last month, the government scrapped import duties on corn from countries outside the Mercosur trade bloc in an effort to curb record domestic prices and boost supplies of feedstock.

“We exported our stocks and so everyone is desperate,” said Marcos Rubin, analyst at consultant Agroconsult, which forecasts exports as low as 23 million tonnes in 2016.

Brazil’s corn exports have tripled since 2012 when a drought over the U.S. grain belt pushed up prices and made winter planting attractive in the frontier grain belt. The country quickly surpassed Argentina as the No. 2 corn exporter.

FALLING EXPORTS, RISING IMPORTS

Strong demand from the livestock industry is supporting internal prices above those at the ports, said independent analyst Carlos Cogo.

The real has also strengthened from its all-time low of 4.15 to the dollar in January to 3.58 on Tuesday, which takes some of the wind out of export sales.

A 60-kg bag reached a record on the domestic market of 52.61 reais on Friday, according to price discovery agency Cepea/Esalq. That equates to a port price of $250 a tonne.

The price of Argentine corn at port is $165-$170/t and U.S. Gulf port corn is $175-$180/t, according to analyst Aedson Pereira at Informa Economics FNP.

Analyst 2016/2017 Date

(Feb-Jan)

Carlos Cogo 33.5 MLN T May 20

AGR Brasil 29.5 MLN T May 24

Flavio Franca Jr 29.0 MLN T May 23

Informa Economics FNP 27.0 MLN T May 24

Cerealpar 24.0 MLN T May 23

Safras & mercado 21.0 MLN T May 23

AgRural 18-20 MLN T May 20

AVERAGE 26.1 MLN T May 24

Previous poll 28.9 MLN T Nov 5

Ag Ministry 2016/2017 28.4 MLN T May 10

Ag Ministry 2015/2016 30.2 MLN T May 10

Additional reporting by Naveen Thukral in Singapore; writing by Reese Ewing in Sao Paulo; editing by Josephine Mason and Marguerita Choy

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