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Weakening currency fuels the next big corn exporter


As currencies fluctuate in value, importers are always looking for cheaper markets to purchase commodities from. Recently there has been a global trend of increasing food prices, however, with the devaluation of the Real, Brazil is quickly picking up market share as a leading exporter of corn. Business Week analyzes the implications of this market shift and how long it is expected to last:

Purchases this year may climb to at least 450,000 metric tons, mostly from Brazil, from 50,000 tons last year, Lee Tae Woong, a deputy general manager at the Seoul-based company, said in a phone interview today. Total corn imports were about 2 million tons last year, he said without giving a 2012 forecast.

“Korean feed-makers will look to import more South American corn for the rest of this year as there’s a wide price gap between U.S. and South American origins,” Lee said. South American corn was priced about $20 per ton cheaper than U.S. grain on a cost and freight basis, he said.

Output in Brazil, the world’s third-largest producer, will rise to a record 73.7 million tons in the crop year that started Sept. 1, from 57.1 million a year earlier, researcher Agroconsult said June 14. Brazilian real has lost 9.3 percent against the greenback this year, making the South American country’s crop cheaper relative to U.S. supplies.

Soybean and corn growers in Brazil will probably increase exports this year as the local currency’s decline against the dollar makes the shipments more profitable, Joao Rabelo, undersecretary of economic policy at the country’s finance ministry, said on June 4. Exporters will probably profit from a weakening Brazilian real until the end of this year, he said.

“Although there could be ups and downs year on year, I would argue it will be a long-term trend for the next decade or so that buyers continue to seek South American corn as output there will rise,” said Nonghyup’s Lee.

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