According to USDA report, 2015/2016 corn production is estimated at 75 mmt, due to an early start to the dry season having an adverse effect on the second “safrinha” crop . This is down 12 percent from the previous year’s record crop. Increased corn exports - incentivized by the strong dollar - coupled with the dry weather, has severely restricted domestic corn supplies. Prices have risen dramatically since March, putting pressure on domestic pork and poultry producers. There have been media reports that some producers are feeding their pigs and chickens milling - quality wheat because they are unable to find any corn or feed wheat on the domestic market.
Tight supplies, combined with high domestic demand and a reduced second “safrinha” crop are all factors in the expected decrease in exports. Some states are proposing measures to restrict grain exports in their states. For example, the state of Goias in the Central - West of Brazil reinstated a law to limit corn and soybean exports to only 70 percent of total production and eliminate the 3 percent intra - state (ICMS) tax exemption on agricultural exports. Goias produces about 10 percent of the total corn in Brazil. In addition, the federal government is again considering a 2.8 percent export tax on all corn and soybeans as a means to encourage and prioritize domestic sales.
Due to the high domestic price of corn and the uncertain economic situation, it’s expected that future growth in the pork and poultry sectors will slow to about 2 percent per year. In the short term, some pork and poultry processing plants have responded by cutting work shifts, enforcing mandatory vacation for employees, shutting down operations, and even prematurely slaughtering animals they are unable to continue feeding.
Friday June 17, 2016/ GAIN-USDA/ United States.