(Agrimoney) – The US government upped its idea of Brazilian corn exports, and lowered its idea of consumption next season, due to rising domestic prices as the currency weakens.
The US Department of Agriculture’s bureau in Brasilia saw corn exports at 26.5m tonnes in 2015-16.
But the bureau also flagged the potential for an export tax in several growing states, including top ranked row crop grower Mato Grosso.
Currency effect
The bureaus latest corn export forecast is down from last season’s record 32.5m tonnes, due to 3.5m tonnes lower production.
But the new number is 1m tonnes above the previous official USDA forecast, of 25.5m tonnes.
“Because of the weakening Brazilian currency, producers are choosing to sell their grain for export, as opposed to domestic consumption,” said the bureau.
Lower consumption
Ideas for feed consumption were trimmed by 1m tonnes, to 58.0m tonnes.
“According to the Brazilian feed industry, the price of corn for domestic use is increasing due to low stocks and is putting pressure on the pork and poultry sectors,” said the bureau.
“If the Brazilian currency continues to weaken into 2015-2016, the expansion of the pork and poultry sector may begin to slow, slowing the pace of domestic corn consumption”.
Tariff introduction
But the market fundamentals could be altered, if a shift in policy discourages export.
“Due to the economic situation in Brazil and the need for state governments to increase revenue, several corn producing states are considering leveeing an export tax on corn and soybeans,” the bureau said.
Analsyt Michael Cordonnier told Agrimoney that Mato Grosso, Brazil’s top row-crop growing state, was one of those considering the move.
Dr Cordonnier told Agrimoney that the measure was being considered as a way of raising revenues.
“The reasoning is the federal government is cutting way back on payments to the states,” Dr Cordonnier said.
State tarrifs
Brazilian state governments enforce tariffs on the export of goods from within the states.
But corn and soybeans, along with other goods, are exempted from export tariffs if the goods are bound for destinations outside of Brazil, even if in the process they are moved to ports and depots outside state lines.
A change in policy would mean that the exemption for exports to overseas destination was removed.
Dr Cordonnier downplayed the potential effect of the tax, which is expected to be in low double figures.
“The devaluation of the currency has been so much greater than any effect of tax, I don’t think it’s going to make much difference,” he said.
