South America Calling
Alastair Stewart South America Correspondent

Tuesday 11/20/12

Brazilian Corn Delays

Delays in Brazilian corn deliveries are forcing Asian buyers to switch to the U.S. to fulfill their needs.

With Brazilian ports so stretched by surging demand this year, the news comes as little surprise.

International buyers flocked to Brazil in the second half of 2012 to snap up its bounteous second crop after drought sharply curtailed U.S. and Argentine production.

And the ports of Santos and Paranagua have actually exceeded expectations in their capacity to ship corn.

Back in July, analysts suggested Brazil couldn't export more than 2.5 mmt per month and would struggle to ship 15 million metric tons (mmt) in 2012-13 (Feb-Jan) because of port shortcomings.

Brazil has broken successive export records since August, shipping 3.66 mmt in October, and the grain is still flying out the ports in November, with shipments totaling 2.25 mmt in the Nov. 1-17 period. At this rate, this month's exports could match or top October's -- certainly ship line-ups indicate they will -- and take the 2012-13 numbers to beyond 16 mmt with two months left in the season. That's already nearly 50% higher than the 2010-11 record of 10.9 mmt.

But even operating at this elevated level, Brazil still hasn't been able to satisfy demand and we have seen approximately 900,000 mt to 1 mmt in corn shipments carried over from the September and October port line-ups.

So when Dow Jones Newswire reported this week that Brazil was behind on over 1.5 mmt in shipments to Asia, it came as little surprise.

The fact that Asians are now switching purchases to the U.S. may mean Brazil does not export 22 mmt in 2012-13, as the current pace of shipments suggests might be possible. But Brazil has the corn Asia needs and, even if buyers are more careful about naming ships from Brazil, the final export number may well be over 20 mmt, topping the 18 mmt to 19 mmt currently predicted by many analysts.

Bottlenecks at port are a perennial problem for Brazil's farmers, who are very competitive inside the farm gate but lose out to the U.S. and Argentina on logistics.

Many of the logistical problems start at the ports, which don't have the capacity to cope with the influx of soybeans and corn every year. New ports are being built, closer to the new Cerrado farm regions, and the government is set to announce a new ports plan, which it claims will promote $20 billion in new investments through 2030, but the problem has traditionally been that capacity generation runs behind demand.

In December, I will be publishing a series of stories on the situation at Brazilian ports.

Posted at 3:54PM CST 11/20/12 by Alastair Stewart
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