Sep 14, 2020
Brazil Lifts 8% Tariff on Imported Rice, is Soybeans and Corn Next?
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
When the Brazilian Minister of Agriculture floated the idea several weeks ago of temporarily suspending the 8% tariff on soybean, corn, and rice imported from non-Mercosul countries, the backlash from commodity groups was swift and harsh forcing the Minister to quickly backtrack on the proposal.
The situation has now changed due to skyrocketing food prices especially for rice and beef. It appears that the fear of food inflation may now outweigh the objections from the various commodity groups. In fact, the Brazilian President has publically pleaded with supermarket owners that it is their patriotic duty to roll back food prices.
Rice is of particular importance since it is a staple of the Brazilian diet. Therefore, the Brazilian government announced last week the suspension of the 8% tariff for 400,000 tons of rice imported from non-Mercosul countries between now and December 31st. The rice imports are expected to come from the United States and Thailand because the rice in those two countries is the same type of rice consumed in Brazil.
After announcing the suspension of the tariff, the Brazilian Minister of Agriculture made public announcements that Brazil will not run out of rice before the new crop becomes available next March. She indicated that reduced domestic production has resulted in temporarily tight supplies and higher prices in the supermarket, but that the government has taken steps to insure adequate supplies and that the prices should stabilize.
Domestic supplies of soybeans and corn are similarly very tight resulting in record high domestic prices. While the high prices have been good for producers, they have been devastating for end-users such as poultry and hog producers in southern Brazil. Large end-users had already imported approximately 500,000 tons of soybeans from Paraguay by the end of August with more expected. Corn imports from Paraguay are expected to approach 200,000 tons.
It is entirely possible that the U.S. may end up exporting some soybeans and corn to Brazil in order to fill the gap before the new crops become available starting sometime in January. Odds of importing soybeans and corn from the U.S. will increase of dry weather results in planting delays in southern and central Brazil.
The very tight grain supplies in Brazil is the result of strong demand both domestically and internationally and a significant devaluation of the Brazilian currency which made Brazilian grain exports very competitive in the world market. As a result, exporters were willing to out-bid domestic consumers for available supplies.