Analysis: Why Brazil, World’s Largest Soy Producer, Wants to Increase Imports

RIO DE JANEIRO, BRAZIL – The Brazilian government has zeroed import tariffs on corn and the so-called soybean complex (grain, bran, and oil) until the first quarter next year, according to a note published on the Ministry of Economy’s website on Saturday, October 17th.

According to the text, the decision was taken on Friday, October 16th. The Ministry of Agriculture, Livestock and Supply proposed zeroing the tariff for soybeans, while the Ministry of Economy asked for a zero rate for corn.

“Both measures are intended to contain the price rise in the food sector,” said the note on the Ministry of Economy’s website.

The reduction for the soybean complex will be in force until January 15th, 2021. The cut from eight percent to zero on the corn import tariff will remain in force until March 31st, 2021.

The decision, subject to analysis amid record prices on the domestic market for both products, was taken on Friday at a meeting of the Executive Management Committee (GECEX) of the Foreign Trade Chamber (CAMEX), linked to the Ministry of Economy.

“There were several findings on the table and the harvest period and supply were considered,” a source told Reuters before the government confirmed the decision. “There was no question about the value of exempting the tariff. The offer needed to be expanded to reduce prices and costs,” he added.

In late September, when the soybean crop for 2020/2021 began to be planted, the Brazilian Soybean Producers Association (APROSOJA) estimated that the area planted with the main Brazilian commodity should increase by 3.8 percent compared to the 2019/2020 season and that production should grow by 3.4 percent over the preceding period – it may exceed 129 million tons.

The request for import exemption was officially presented last month and reiterated last week by the Brazilian Association of Animal Protein (ABPA), which represents the sectors of poultry and pig farming in Brazil.

The industry uses cereal and soy bran as the main feedstock and has its margins affected by the increased costs of these grains.

The Ministry of Agriculture had stated in late August that it was considering the prospect of temporarily exempting the Common External Tariff (TEC) on rice, corn, and soy imports from non-Mercosur countries to balance the domestic market and prevent further price hikes.

In early September, the CAMEX executive committee passed the exemption of the tariff on rice imports until the end of the year, amid the surge in prices of the product in Brazil, after an increase in domestic demand during the pandemic and because of heated exports. However, at the time, no decision was made with respect to corn and soybeans.

The month of March is the period in which the Brazilian summer crop will have been harvested and the availability of domestic supply will increase.

Record price and exports on the rise

President Jair Bolsonaro said last Saturday he would meet with soybean producers to discuss its price, days after the product’s quotation had renewed record peaks in Brazil due to the current offer adjustment.

Throughout the year, the rising dollar has favored exports, and firm external demand increased the volumes of soy shipments out of Brazil, which could reach 82 million tons, leaving a shortfall for local industry requirements and increasing the need for imports to meet the local demand.

The price of soy at the Paranaguá port, one of the country’s benchmarks, stands at R$157.66 (US$31.5) per bag, close to the record R$159.88 on October 8th, according to the CEPEA study center. Corn prices are at nominal peaks of R$69.53 per bag, also according to the institution.

Source: Exame