Brazil’s northern arc corn export route stymied as global prices slump

Poor demand and a further slump in global corn cash prices has blunted hopes that Brazil could use its Amazonian ports – part of the northern arc development – to leverage their competitive prices and kickstart the export campaign, market sources told Agricensus Friday.

The move comes as offers for northern arc ports, such as Santarem and Itacoatiara on the Amazon River or Barcarena on the northern Atlantic coast, have fallen as low as 30 cents over the December futures contract, according to market sources.

That’s some 30 cents lower than FOB offers basis the main export hub of Santos in south Brazil, and around 20 cents below other origins such as Ukraine and the US Gulf.

That has lead some market sources to hope that the locations’ competitive edge could enable it to act as a springboard to challenge US dominance.

“It makes sense, depending on the port… 30 cents (over December) is feasible for Itacoatiara, for Barcarena 45 might be better,” one market source said.

But poor demand, falls in other origins and challenges around using the ports – which typically are unable to load vessels bigger than 55,000 mt – mean interest remains limited.

“People are desperate to sell… we have the cheapest offers, but buyers aren’t showing them to us,” a second market source said.

“Bad news for the northern arc, basis prices are still melting there,” one trader said, as competing origins blunt any potential demand.

“Since the European, Middle East, Egypt demand is being filled with Black Sea prices… the Black Sea and US are weaker and more competitive to these destinations. I don’t see a good perspective to the north,” the trader said.

With Ukraine’s prompt loading corn basis values losing up to 10 cents Friday, and with US Gulf values also edging down again, South American basis values may need to lose further ground in order to entice buyers. 

The northern arc development is a major investment project aimed at bolstering export capacity in the north of the country.

The project should alleviate pressure on the big southern ports like Santos, improve transport logistics using rail and river, and reposition Brazil's corn and soybean export flows to better serve a wider range of potential customers.