Maize price on the Brazilian Mercantile & Futures Exchange (BM&F) soared to a record high of BRL 1.4/kg on 21st October. This represents a significant increase of 16% week-on-week (w-o-w) and almost double the price recorded in the same period the previous year (92%).
Brazilian maize prices have been on a bullish trend since mid-2020, due to concerns over adverse weather conditions impacting the harvesting of the ‘safrinha’ crop and significant high domestic demand. There is no shortage of maize in the country, but sellers are holding to supplies on a bullish sentiment of further price increases in line with drought concerns across major suppliers in South America. In addition, the high export demand from China for beef and pork meant Brazilian farmers were encouraged to boost cattle and hog production, thus increasing maize demand for animal feed. According to the USDA, Brazilian feed domestic consumption is forecast to rise by 2 million tonnes in 2019/20 compared to the previous year to 59 million tonnes, followed by a further increase of 1.7% y-o-y in 2020/21.
China has imported record volumes of grains and oilseeds such as maize and soyabean from the US, as the country aims to rebuild its hog stocks following the African Swine Fever impact. High demand has led the Chicago Board of Trade (CBOT) maize price to rally to a 12-month high, which was then reflected across the global maize market.
Due to the record prices in Brazil, the economy ministry announced a plan to suspend maize and soya import tariffs from countries outside of Mercosur until 31st March 2021. The current tariff on maize and soya imports from outside Mercosur is 8% and 6%, respectively. Therefore, the removal of a tariff is likely to benefit US farmers, supporting CBOT maize prices in the next couple of months and curbing domestic maize prices in Brazil to an extent.