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Is Brazil the Mystery Buyer of U.S. Corn?

U.S. export sales data shows that an unnamed buyer has booked a purchase of 136,000 tons of U.S. corn, creating global speculation that the buyer may indeed be drought-stricken Brazil. If suspicions prove true, it would mean that Brazil is extending beyond its traditional Mercosur-based corn sources of Argentina and Paraguay to secure its largest U.S. corn purchase since 1995.

Ongoing drought and booming exports are creating challenges on the domestic market of the world’s third largest corn producing country, leaving its processors scrambling for supplies and driving up prices. In response, Brazil’s government scrapped import taxes on corn sourced from countries outside the Mercosur trade bloc as the ongoing drought is beginning to threaten the outcome of the country’s upcoming harvest beginning in June. The lifting of the tariff has resulting in a flurry of deals as a new market opens and disrupts regional trade flows.

It is estimated that upwards of 700,000 tons of U.S. corn may make it way to Brazil before its next harvest begins as high inventory and low freight make it competitive with Argentinian corn – not a high volume compared to global trade flows, but far exceeding U.S. shipments over the past two decades.

Without the tariff, U.S. corn shipped from the Gulf Coast to northeast Brazil where the bulk of the country’s poultry processors are located, is estimated to be $6 per ton cheaper than corn shipped from Argentina and $35 per ton cheaper than domestic corn, according to Reuters reports KTIC Radio. However, challenges remain for traders who must secure all regulatory approvals and guarantee that shipments do not contain yet-unapproved GMO strains.

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