Part of the chicken and pork processing industries in Brazil will need to seek more corn abroad starting next month, given the high level of domestic prices for the sector's main raw material, estimated the Brazilian Animal Protein Association (ABPA) and other market participants.
Imports may originate from Argentina and Paraguay, traditional suppliers when supply tightens in Brazil, or even in the United States.
The price of corn on the physical market exceeded 60 reais per 60 kg bag last week, the highest nominal value in history, according to the Cepea study center, after the country started the year with low stocks after record exports in 2019.
“We monitor the market and the thermometer indicates the need for imports as early as May. The first harvest (2019/2020) was very bad because of the drought, supply is low and prices are very high”, said the president of ABPA, Francisco Turra.
At the moment, the country is harvesting its first corn crop, but frustration with the weather in Rio Grande do Sul has helped to support prices in Brazil, which will have to wait for the production of the second crop to reach the market, only in mid-June — the Winter cereal production is the largest in the country, accounting for 75% of the total harvest, estimated at around 100 million tons.
Corn imported from Argentina and Paraguay has competitive prices for some industries in the South of Brazil, in relation to the product coming from the Center-West due to the transportation cost, even with the exchange rate fluctuating at record levels.
The North American currency follows a global upward movement, in the face of growing evidence that the world is already in a major recession.
The spot dollar closed at 5.2918 reais on sale and has fluctuated close to historic highs in previous sessions.
Turra explained that, as the currencies of Argentina and Paraguay are even weaker than the real in relation to the dollar, the value of corn remained attractive for Brazilian buyers, who have already imported the grain in previous years.
“(With this exchange rate) it is difficult to import corn from the United States. Industries in the Northeast always need to bring some volumes from there, this year they haven't done so yet, but this possibility is not ruled out soon, especially if the off-season is not full.”
Agrifatto consultancy analyst Yago Ferreira warns that the corn contract on the Chicago Stock Exchange reached 3.28 dollars per bushel this Monday, which, according to him, represents 40.60 reais per bag, a value below 48. 79 reais per bag that the cereal is currently being priced at B3, for delivery in May.
“This in itself would justify the fact that imports should be put on the agenda by domestic consumers,” said the analyst.
Ferreira highlighted that Brazil's second corn harvest, which is in the field, will only reach the market in mid-June. Even though production is good, it leaves a gap in supply and demand between April and May, in some regions of the country with low supply in the first harvest.
In line with market projections, Agrifatto expects the country to harvest 73 million tons of corn in the 2019/2020 harvest, a drop of 3.31% compared to the last harvest.
Rural Clima's agrometeorologist, Marco Antônio Santos, predicted on Monday that a cold front will cause rain in regions producing off-season grains in Brazil this month, which should benefit crops.
Regarding the import of North American corn, the Agrifatto analyst considers the hypothesis feasible, as the first Brazilian harvest will probably not be enough to reduce the domestic price to the point of making it more competitive than the corn that is in the stocks of USA.
“With the demand problem in the USA (quarantine and oil crisis), corn crushing tends to have a strong reduction, that is, it opens up more space for (the import of) North American corn.”
EXTERNAL PURCHASES
In the first two months of 2020 alone, corn imports from Brazil jumped by around 235% compared to the same period last year, to 283.73 thousand tons, with Paraguay accounting for almost all of the imported cereal, according to data from the Ministry of Agriculture.
JBS, owner of Seara which operates in the poultry and pork sectors, was one of the companies in the meat sector that contributed to the acquisition of this amount.
The company told Reuters that it negotiated around 100,000 tons of Argentine corn with a reception scale of three monthly loads, with the third scheduled for May 2020.
“The high costs of Brazilian corn seen in recent months have required the adoption of alternative measures for purchasing the cereal on the foreign market.”
JBS's decision is based on the better competitiveness presented in the import of Argentine cereal in relation to the current cost of the grain in Brazil, the company added in a note.
In addition to the 100,000 tons of corn that will arrive for JBS by May, another 100,000 were imported by the company previously and were scheduled to arrive in the country by March, said a source with knowledge of the matter on condition of anonymity.
BRF, owner of the Sadia and Perdigão brands, has still maintained purchase negotiations on a regular basis and there has been no drop in the supply of inputs in Brazil, according to the company's statement last week.
Despite not having chosen to import this year, BRF is not completely ruling out this possibility, it constantly monitors market price conditions and can opt for whatever is most competitive for the company, another source who declined to be identified told Reuters.
Source: agrolink
