Brazil's JBS imports corn for first time in 2019

SAO PAULO: Brazilian food giant JBS SA has ordered its first shipment of imported corn this year to be used as feed at meat processing plants in the southern state of Santa Catarina, a source with direct knowledge of the decision said on Monday.

The source, speaking on condition of anonymity because the information is not public, said the company resorted to importing corn, renewing a practice that became common for several months starting last March.

Santa Catarina's proximity to Paraguay and Argentina gives local meat processors an incentive to source corn from abroad instead of buying from Brazil's main grains belt, especially given government-set cargo prices which many in the market view as exorbitant.

JBS is slated to bring in initially some 30,000 tonnes of corn from Argentina, the source said, adding other cargoes are being considered.

Last year JBS imported the equivalent of five ships from Argentina containing loads of between 30,000 tonnes and 35,000 tonnes of corn each, the source said.

The move suggests those meat processors with the ability to alternate suppliers stand a better chance of protecting operating margins given Brazil's poor infrastructure capabilities and legal insecurity stemming the government-set cargo prices instituted last year after a truckers' strike.

"Other players are looking for alternatives in the market," said the source. "But they are slower to make decisions."

JBS did not have an immediate comment.

Rival BRF, Brazil's largest chicken processor and the world's largest exporter, did not comment immediately.

The source said overall companies are reluctant to take on freight risk given the Supreme Court has yet to rule on lawsuits challenging the legality of the government's decision on cargo rates.

In 2018 striking Brazilian truck drivers disrupted supplies and exports from one of the world's agricultural power-houses after a 10-day stoppage over a rise in diesel prices, leading the government to introduce the minimum freight prices.

As much as 167 meat-producing plants halted operations and at least 70 million chickens of a total flock of 1 billion were culled during the strike.

The source said the fact Brazilian farmers are holding out as they await for higher corn prices is also a factor leading JBS to buy from Argentina.

"This, combined with more expensive freight in Brazil, makes importing (corn) attractive," the source said.