Supply constraints and surging price volatility for corn and soy have triggered a trade flow reversal among the world’s largest corn and soy producers, the United States and Brazil. To meet their respective domestic needs, the US will import Brazilian soybeans and Brazil will soon be open to corn imports from the US. Typically, both countries are able to meet their own needs domestically.
The US hasn’t imported Brazilian soybeans since 2014, when US supplies of the oilseed were as tight as they are today. Brazil, meanwhile, hasn’t imported corn from the US on a significant scale since May 2003.
Brazil’s move is a bid to keep supplies available while its battles with high prices amid low supply in the midst of its ongoing drought, which has been crippling the country’s corn production.
Cash corn prices in Brazil have risen 20% in 2021 as corn production plummeted due to declining yields as seen in Gro’s Brazil Corn Yield Forecast Model.
Usually, Brazil turns to Paraguay when it needs to import corn because import tariffs from outside the Mercosur trade bloc are financially prohibitive. Brazil’s ongoing drought conditions have forced it to change course, however.
Back in April, Brazil renewed tariff exemptions on imports of soybeans, corn, soybean oil, and soybean meal from outside the Mercosur bloc in an effort to keep its domestic market in balance amid soaring domestic prices. Additionally, a recent ruling by the Brazilian biosecurity regulator, CTNbio, that allows crops with genetic modifications to be transported on the same ship as non-GMO crops, will facilitate imports of GMO-corn from the US.
The US is the largest supplier of corn worldwide whereas Brazil is the No. 1 supplier of soybeans, surpassing the US in 2017. The flow of Brazilian soybeans to the US will likely be reflected in the May census data that will be released July 2.
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