Brazil books 60k Argentina corn, may seek more on weather woes

Market sources say Brazil could turn to neighbour Argentina for further corn supplies in a move driven by weather worries and logistic challenges, market sources said Monday.

The move of Argentine corn to Brazil’s southern states, first reported by Reuters late Friday, comes as Brazilian farmers refuse to sell their own crop on hopes of higher prices.

Ironically, those hopes of higher prices are fuelled by a shortage of Argentinain corn.

Market sources anticipate further buying following in the days ahead, with 60,000 mt already heard booked and more cargoes said to be sought.

“This is a special year for Brazil. The summer crop was poor and demand from the poultry and meat sector has been pretty steady... and Brazil has no corn for that,” one market source based in Argentina told Agricensus, with the move not unprecedented.

“It happened last year [as well], but I have confirmed who sold the cargo,” a Brazil-based source said, declining to name the specific company involved but stating it was “one of the big four.”

The big four typically refers to the agri-majors of ADM, Bunge, Cargill and Louis Dreyfus.

Further resupply is also likely to be sought in Argentina, according to the second source, as the southern states into which the cargoes are set to be imported are difficult to reach from the US or even from domestic resupply.

“Farmers in Brazil are not selling, and scarcity will be in the south; US corn makes more sense for northern demand,” the second source said.

Internal road and rail logistics can complicate a move from the agricultural powerhouse states, which typically are to the north and west, to the weather-affected south.

However, with domestic prices raging, the appetite to move corn over any distance has been stunted by farmers holding on to supply and local buyers paying up.

Strange

The circular argument is completed by the stronger global corn picture, which has seen prices on the Chicago Board of Trade draw support on weather fears for Argentinian corn, further fostering the wait-and-see approach adopted by corn farmers globally.

“You know that Brazil is a larger producer than Argentina, so basically it is strange to see them buying from here, although sometimes it happens,” the first source said.  

“There is no farmer-selling in Brazil. They have corn but they are not selling it or will only sell it at a high price, hence it made more sense to import from Argentina,” he continued.

Domestic prices in Brazil have surged with the agriculture agency CEPEA quoting the price of 60kg bags in the state of Sao Paulo rising to BRL41.42 per bag, around $12.74/bag.

That has risen from BRL 31.89 on January 25.

Southern states of Brazil have suffered near drought conditions weather along with much of Argentina, which has slowed harvesting and planting in the southern states.

According to SIGA, the agriculture agency for Mato Grosso do Sul, corn plantings in the second safrinha crop are at 57.7% across the state, delayed by a late running first crop and well behind the five year average which is at 75.7%.

However, the further south you go in the state, the worse the figure become, averaging just 45.6% and taking a toll on anticipated yields.