top of page

Corn: Brazilian prices are competitive for the Chinese market

Porto Alegre - RS - Brasil - 20230818

Comparison of corn prices between Brazilian sales and Chinese purchases.
Corn prices comparing domestic costs in China with Brazilian domestic costs.

Source: RGA database.

Brazilian corn prices are arriving in China with highly competitive values for the Chinese domestic market, if compared to the domestic price minus expenses and taxes. Considering Brazilian internal costs, freight and currency fluctuations, Brazilian prices can arrive in China with an advantage of US$ 40.00 to US$ 50.00.

Understanding the Chinese market:

The Dalian Stock Exchange dictates domestic prices in China and daily releases local prices, with trading volume and prices in Yuan (RMB). These prices are usually charged by purchase costs (imports) and compared with domestic demand, as well as the prices of inputs and feed and, consequently, of food. Notably, one of the factors that may be influencing these prices is the devaluation of the Chinese currency, which in recent months has been between 7% and 7.5%.

Another situation that indicates concern is the weather conditions in northeast China - this region is the most significant production zone for Chinese maize. At the beginning of the year, there were occasional rains that created a moisture deficit. However, the main concern is higher than normal temperatures that persist for a significant period of time. In recent days, China has suffered flooding with the arrival of a super typhoon, which hit the corn and rice producing regions, flooding large volumes of areas, indicating a potential loss in production of approximately 5 million tons of corn, i.e. , Chinese production potential may be compromised by prevailing conditions.

Another determining factor is that China's wheat crop was impacted by excessive rainfall at harvest. This reduced the yield a bit and had a bigger impact on quality, so more wheat could fall into the feed category and will offset the potential lower corn production.

The USDA is forecasting Chinese corn production in 2023-24 at 280 million tons, a new record, but there are still doubts as to whether the losses caused by the super typhoon that hit the continent this month were computed, and it is likely that we will have further adjustments to the newsletters for the month of September. Imports are forecast at 23 million tonnes, up 5 million tonnes from 2022-23.

China, on the other hand, has been a significant benefactor of the Black Sea Grain Initiative (the agreement by Russia, the UN, Turkey and Ukraine to allow the passage of Ukrainian grain), so China has been the biggest market for Ukrainian corn. The continuation of the deal looks tenuous. Ukraine may not be able to match 2022-23 export volumes to China. This suggests there could be incremental business for both Brazil and the US if China imports 23mt in 2023-24.

Weather conditions in northeast China may reduce the Chinese corn crop. If there was a reduction of 10 million tons, there is potential for additional Chinese corn exports. The steady rise in corn futures from July to September maturities in Dalian indicated that these concerns already existed.

However, we know that final imports of Chinese maize in 2023-24 will not only be a function of the market, but also, depending on China's import policies and quota system, which will play a role in determining final import volumes.


Brazilian corn is far from being within the calculation bases of the Chicago Stock Exchange (CBOT) and this disparity raises doubts for the Chinese buyer, perhaps for this reason that business is always blocked, because the world is used to the Chinese buying based on prices from CBOT. So have the fundamentals changed? Yes, there is a lot of internal pressure on port costs and freight costs, especially due to the high demand for services, in both cases (ports and freight), which is inconsistent with the usual premium calculated by analysts (premium = market price minus price in the interior and /or premium = "American" producer price - CBOT + more costs to ship - less logistical and port efficiency).

Why is there a mismatch? Because if we deduct the market price minus port costs, which are higher this year, with an increase in waiting times for vessels and, furthermore, logistical inefficiency, producers in states like Mato Grosso would have prices below R$ 30.00 a bag, which would be practically a sale at cost or loss, therefore, those who can wait and sell at a better price let it and offer. This pressure pushes the producer price cap above the CBOT and puts pressure on premiums, forcing buyers to offer more to make their scheduled shipments.

Comparatively, if we attribute a shipment in Paranaguá, which has broken export records this year, and the origin is northwest of Paraná and Mato Grosso, the average price reaches R$ 68.00 per bag for a FAS port price in Paranaguá, more costs and margins, raising our prices by around R$5.00 above the CBOT, which results in a higher premium of US$0.43 per bushel or approximately US$16.75 per ton.

However, after calculating this price variation, we add US$ 5.00 of risk and the extra costs of the port, raising the "Fobis" condition from US$ 7.00 to US$ 10.00, adding the financial cost of 1.5%, we arrive at the price with zero risk on the sale, and the unbelievable US$ 246.84, as per the table above for August and September maturities. This price of US$246.84 compares with the Chinese domestic price minus costs and taxes, as well as insurance and freight of US$45.00 (raised to contract standards and China usually calculates US$40.00 as a marker), we arrive at the FOB Brazil x China price of US$ 287.61, representing US$ 40.77 in savings for the Chinese buyer.

It is important to remember that there is still an internal cost of transport in China, but we understand that Chinese logistics efficiency surpasses us on a large scale (waterways, railways, first world roads) to dispose of its production and purchases.

Is it good to buy corn from Brazil? Leave your comments.

11 views0 comments


bottom of page