With intense drought conditions severely damaging corn harvests, U.S. companies are taking the unusual step of importing corn from Brazil.
But if you’re looking to profit from this trend, there is something you should know before you start trying to chase high prices even-higher. I’ll give you my outlook in today’s video.
Best wishes,
Rudy
Video Transcript
Hi, this is Rudy Martin for Uncommon Wisdom Daily.
This summer has been one of the hottest on record, causing major problems for large parts of the United States.
Over the past week, drought conditions intensified throughout the Midwest, causing irrevocable damage to crops in Missouri, Indiana and even southern Illinois. It’s gotten so bad that corn farmers are doing anything they can to salvage the harvest, like cutting stunted corn to use as low-grade feed for cattle.
The U.S. corn supply was already dangerously low, and now, stockpiles are projected to be the smallest in 16 years by the end of the summer. The terrible conditions have forced the U.S. Department of Agriculture to slash its harvest estimates and raise price forecasts. In response, corn futures surged, going up 30 percent in just the last three weeks!
To boost supplies, U.S. companies are taking the unusual step of importing corn from Brazil. This is not just a necessary step; it makes economic sense too.
Brazilian corn was recently offered at about $274 per ton for September shipments, with an additional freight cost of about $30 per ton. By comparison, U.S. corn was selling for around $311 per ton.
This shift is sure to strengthen Brazil’s position in the global corn market. The country has helped erode the United States’ dominance of the trade in recent years, even gaining a foothold in Asian markets that have traditionally imported U.S. corn almost exclusively.
But for commodity traders looking to profit from this trend, I would caution you not to overreact. Yes, this is the worst drought in 25 years, and it has turned the world’s biggest corn exporter into an importer. But it would be a very risky play to chase rising U.S. corn prices, because one good week of rain could mean a big difference in the crop estimate.
I’m Rudy Martin for Uncommon Wisdom Daily. Thanks for watching.
{ 1 comment… read it below or add one }
When you say that Brazilian corn might fill US silos, you are confusing corn kernels which are bought and sold as grain with corn stalks which are shredded and fed into the silo to become cattle feed in the winter. It would be impossible to transport corn stalks from Brazil to the US. Hence, farmers who read this post will think you don’t know what you are talking about. Also, the drought in the US will affect cattle feed no matter what we import from Brazil. Farmers might even have to sell their cattle to be made into beef to avoid having them starve. This could crash the beef market short term.