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  • Unconventional Ag

Brazil Takes Aim at US. Farm Subsidies as Rousseff Readies Visit

Brazil and the U.S. appear to be headed toward a clash over U.S. soy and corn subsidies.

The Brazilian government is gathering information to show evidence that the U.S. is increasing subsidies to its corn and soybean farmers which will result in even further downward pressure on prices for the two main Brazilian crops.

Brazil plans to pressure the U.S. on its policy at the World Trade Organization (WTO) agricultural committee, and rally support from other corn and soy producing and exporting countries prior to President Dilma Rousseff’s visit to Washington in June aiming to increase trade between the two major exporting countries. Although the topic of farm subsidies will not be discussed directly with President Obama, Brazilian officials plan to broach the subject with U.S. officials before the visit.

One Brazilian official told Yahoo News under anonymity, "We are certain that U.S. subsidies will rise, but we need to gather evidence during the next harvest to build our case," said another official involved in trade policymaking. "We don't rule out a trade dispute, but we are in the early stages."

The U.S. contends that its farm policies are transparent, do not distort the markets in any way, and are compliant with the country’s WTO commitments.

Brazil worries that the global slump of 35% in soy prices and 60% in corn prices will drive the U.S. government to increase subsidies to its farmers through veiled programs such as crop insurance schemes under the 2014 farm bill. Brazil’s current agriculture minister, Katia Abreu, warns that Brazil could lose up to $500 million per year in soy export revenues as a result.

Brazilian officials believe they will have sufficient evidence of market distortion by the beginning of 2016 to officially challenge the U.S., but meanwhile, plan to pressure the U.S. on the transparency of its subsidy policies.

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