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Here Comes The Brazilian Corn

Here Comes The Brazilian Corn

The U.S. is the world’s greatest producer and exporter of corn. So it was big news this week when Reuters reported the U.S. purchase of 750,000 metric tons of corn from Brazil.

Purchased by North Carolina hog producers Prestage Farms and Murphy-Brown LLC, along with poultry producer Nash Johnson & Sons' Farms Inc., the imported corn is actually about 5% cheaper than U.S. product transported from the Midwest, Reuters reports. In fact, USDA is projecting record imports of corn into the U.S. this year – nearly 2 million metric tons. We’ve already seen elevated levels of Canadian wheat coming into the U.S., as livestock producers have moved to replace expensive corn in their rations.

This being an election year, no one believed that the renewable fuel standard (RFS) mandate would be reduced. But in its place has risen the question of creating a national grain reserve, similar to the national petroleum reserve, in which the government would release grain in drought years and purchase grains to support prices in times of need. With today’s budget constraints it’s hard to imagine this idea gaining much traction. And with corn prices at historically high price levels, and no end in sight, it’s hard to imagine when the government could initially fill a grain reserve without causing another price explosion.

It’s important to keep in mind that while this drought is being described as the worst in 50 years, the reduced corn crop is still one of the largest in history. But it’s also the smallest in the last six years, which has been a period of unprecedented corn production in the U.S. A truly small crop would be nothing short of devastating.

The livestock industry has responded to the increase in corn price by greatly reducing the amount of corn it feeds cattle, largely shifting to other grains and byproducts. These measures reduce the situation in the short term, but they don’t lower the risk associated with a true short crop in the future.

TAGS: Feed Exports
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