Brazilian meat industry will need more imported corn as of May

Posted by Marina

Part of the chicken and pork meat processing industries in Brazil will need to seek more corn abroad starting next month, given the high level of domestic prices of the main raw material in the sector, the Brazilian Association of Animal Protein (ABPA) estimated. and other market participants.

The import may originate in Argentina and Paraguay, traditional suppliers when the offer tightens in Brazil, or even in the United States.

The price of corn in the physical market surpassed R $ 60 per bag of 60 kg 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 already in May. The first harvest (2019/2020) was very bad because of the drought, supply is low and prices are very high, ”said ABPA President Francisco Turra.

At the moment, the country is harvesting the first corn crop, but a frustration with the climate in Rio Grande do Sul has helped to sustain prices in Brazil, which will have to wait for the production of the second crop to reach the market, only in mid-June - 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 southern Brazil, in relation to the product coming from the Midwest due to the cost of transportation, even with the exchange rate fluctuating at record levels.

The US currency is following a global upward movement, in the face of growing evidence that the world is already in a recession of great magnitude.

The spot dollar closed at 5.2918 reais on the sale and has fluctuated near historical highs in previous sessions.

Turra explained that, as the currencies of Argentina and Paraguay are even weaker than the real against the dollar, the value of corn has remained attractive to the Brazilian buyer, who has already imported the grain in previous years.

“(With this exchange) it is complicated to import corn from the United States. The industries in the Northeast always need to bring some volumes from there, this year they haven't done it yet, but this possibility is not ruled out soon, especially if the off-season doesn't come full. ”

The analyst at Agrifatto, Yago Ferreira, advises that the corn contract on the Chicago Stock Exchange reached $ 3.28 per bushel on Monday, which, according to him, represents 40.60 reais per bag, below 48, 79 reais per bag that the cereal is being priced at B3 currently, for delivery in May.

"This alone would justify the fact that imports should be put on the agenda by domestic consumers," said the analyst.

Ferreira stressed that the second corn crop in Brazil, which is in the field, will not reach the market until mid-June. Although 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 off-season, down 3.31% compared to the previous harvest.

Rural Clima's agrometeorology, Marco Antônio Santos, predicted on Monday that a cold front will cause rain in regions that produce safrinha grain in Brazil, this month, which should benefit the crops.

Regarding the importation of North American corn, the Agrifatto analyst considers the hypothesis feasible, since 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 the USA.

"With the problem of demand in the USA (quarantine and oil crisis), the crushing of corn tends to have a sharp reduction, that is, it opens more space for (the importation of) American corn."

Only in the first two months of 2020, corn imports from Brazil jumped about 235% in relation to the same period last year, to 283.73 thousand tons, with Paraguay accounting for almost the totality of imported cereal, according to data from the Ministry of Agriculture.

JBS, holder of Seara that operates in the poultry and pork areas, was one of the companies in the meat sector that contributed to the acquisition of this amount.

The company told Reuters it had traded about 100,000 tonnes of Argentine corn with a receiving schedule in three monthly loads, the third scheduled for May 2020.

"The high costs of Brazilian corn seen in recent months have required the adoption of alternative measures for the acquisition of the cereal in the foreign market."

JBS '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 tonnes of corn that will arrive at JBS by May, another 100,000 tonnes have been imported by the company previously and were expected to arrive in the country by March, said a source with knowledge of the matter on condition of anonymity.

BRF, which owns the brands Sadia and Perdigão, has still maintained the purchase negotiations on a regular basis and there was no break in the supply of inputs in Brazil, according to the company's statement last week.

Although it did not choose to import this year, BRF does not totally rule out this possibility, constantly monitors market price conditions and can choose what is most competitive for the company, another source who declined to be identified told Reuters.

Source: Agrolink