SAO PAULO: Corn prices in Brazil fell sharply in the fourth-quarter inter-harvest period, weakened by strong Mercosur imports, which have helped the country's poultry and pork industries as they struggle with high feed costs and weak margins.
Local prices for the cereal have fallen 10 percent in the quarter that started in October to 37.59 reais ($11) per 60-kg bag, the lowest since January, according to the Esalq/BM&FBovespa index. Prices touched an all-time high in early June of 53.91 reais.
Brazil's poultry export sector, the world's largest, had to scale back capacity by up to 15 percent earlier in 2016 due to record high corn prices brought on by rapid exports and a drop in output due to drought. Since 2012, local corn prices have surged between October and December due to seasonally tight supplies ahead of the harvest, which starts in January.
Analysts say that strong tariff-free corn imports from Mercosur producers such as Argentina and Paraguay, combined with a drop in Brazilian corn exports helped to weaken prices.
Shipments of Brazilian corn abroad so far in November are 82 percent below the same period a year ago, customs data showed. Total 2016 corn exports from Brazil are expected to come in at 18-19 million tonnes, down sharply from initial forecasts of 28 million tonnes, the grain exporters association Anec said.
"Volumes of corn sent to port for shipment in the past two months have been quite low," corn specialist Juliano Cunha at local analyst Celeres said. Poultry industry data showed that September chick production rates were down 11 percent from January before the drought hit corn output.
Poultry and pork industry producers have received shipments of 2 million tonnes of Mercosur corn since October.
"Big meats producers like to enter December well stocked because it is always a tough month to secure supplies," said senior analyst Steve Cachia at grains brokers Cerealpar.
Small to medium poultry producers, however, who lack the financial muscle to book forward delivery of corn, are cheering the drop in spot feed prices.
"It was the worst year in a generation," said Antonio Carlos Costa, head of the poultry association in Minas Gerais.
"There is light at the end of the tunnel, despite prices still being far from normal."
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