Brazil faces corn conundrum after weak crop necessitates more imports

I am glad I am not a chicken in Brazil.

Brazil's booming poultry industry needs corn but supply concerns might have Brazilian's chickens wondering where their next meal is coming from.

What began as a great year for exporters with good domestic production and a weak Brazilian real quickly turned challenging as dry weather damaged its second crop. Brazil’s second crop, or “safrinha,” is rather confusingly the main corn crop in Brazil, and for this year its production was 24.7% lower than the year-ago period, according to Conab.

The drop in production and resultant higher prices saw Brazil go from exporting 34.46 million mt of corn in the 2014/15 marketing year to exporting just 16.5 million mt of corn in the 2015/16 marketing year.

And even worse, it went from importing just 330,000 mt of corn in the 2014/15 year to importing 2.30 million mt of corn in the 2015/16 year.

Big news for a country that is usually such a big exporter.

In response to Brazil’s need for corn the Brazilian government approved an exemption of the 8% corn import tax six months back in April, for countries Mercosur, the South American trade bloc. As the end of September the import tax exemption was then extended for an additional 90 days.

But where is the world’s corn?

The US is the largest producer of corn in the world, accounting for 36% of the production for the 2015/16 marketing year. It is also the main corn exporter, with 40% of the total world exports. However, according to last US Department of Agriculture survey, it is estimated that around 92% of the corn planted in the US is genetically modified — which means not every country is eager to buy US corn, despite the cheaper price. It's also an issue for those looking to move corn from the US to Brazil.

In early October, the Brazilian Commission of Biosafety (CTNBio) agreed to start the approval process to allow imports of three varieties of genetically modified US corn; previously, only one GMO corn variety had been approved. A 30-day review period was initiated for any feedback, this deadline passed at the beginning of November, opening the doors for US corn to head to Brazil for consumption. However, the USDA weekly export sales data for the beginning of November showed as yet no US corn heading to Brazil.

But what is GMO corn? According to the US Food and Drug Administration(opens in a new tab), a genetically modified organism refers to an organism that has been subject to a genetic engineering process, which is the name for certain methods that scientist use to introduce new traits or characteristics to an organism.

GMO crops are not just an American phenomenon; 28 countries grow biotech crops, including the world’s top corn exporters: the US, Brazil and Argentina. Just from these three main corn exporters, almost 60% of the world corn exports are genetically modified.

Ukraine provides 14% of the world corn exports and is the only major corn exporter that bans the cultivation of GMOs.

Record high corn production, record high corn demand

Recently, much has been said of the record high world corn production levels, but not many people have been talking about the also record high world corn demand levels. Yes, the US had high corn yields; the most recent USDA World Agricultural Supply and Demand Estimates report(opens in a new tab) stated a projected US corn yield of 175.3 bushels per harvested acre, up from the October reports projection of 173.4 bu/acre.

But we also had high world corn consumption records thanks to competitive prices and growing consumption habits for protein — protein from animals fed with corn.

Having said all that, regardless the advantages and disadvantages of GMOs, regardless the acceptance or rejection of GMOs, regardless of how GMO food will be labeled, Brazil, the world and all those chickens need corn, and the most of the corn available will be genetically modified.

While Brazil and the world discuss and evaluate whether to accept imports of genetically modified US corn and how to label it, I will have some chicken tacos for dinner. Tacos made with tortillas very likely to come from GMO corn, and chicken that most probably has been fed with GMO corn.