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A look back at how Brazilian commodities performed in 2020

Dec, 29, 2020 Posted by Ruth Hollard

Week 202053

The devaluation of the real against the dollar and the change in consumption habits caused by the Covid-19 pandemic resulted in a very favorable year for Brazilian commodity exports. Brazil exported a lot and basically ignored the domestic market. To contain price hikes, the government had to eliminate the import tax on many basic products, such as rice and corn, which caused unusual situations, such as the importation of American soy. See below how 2020 impacted the commodities that stood out on the international stage:

Sugar and Ethanol: Sugar showed a very solid performance in 2020. According to the 3rd Survey of the 2020/21 Sugarcane Crop, released in December by CONAB (the national food supply company), Brazil’s sugarcane sugar production for the current harvest, 665,105 million tons, approaches the historical record set in 2015 when 665.6 million tons of sugarcane were harvested. Compared to last season, growth is forecast at 3.5%. Sugar exports totaled 23.7 million tons in the first eight months of this 2020/21 harvest (April to November), 79.2% more than in the same period of 2019/20. In relation to the entire past cycle, the volume is already 25% higher. According to the state-owned company, the expectation is that the 2016/17 record will be exceeded when Brazilian shipments reached 28.3 million tons.

But increased exports generate logistical problems. In June, the wait time for loading sugar at a Rumo terminal in the Port of Santos reached 45 days according to the maritime agency Cargonave. As a comparison, in the same period of 2019, the average waiting time was five to seven days.

To circumvent these problems, some alternative solutions were adopted. After 15 years, the Port of São Sebastião, located on the north coast of São Paulo, began to carry out sugar transport operations again. In addition, after a decade-long hiatus, break-bulk sugar export operations were carried out at the Port of Santos, since the terminals operating in containers were saturated.

According to a report by the United States Department of Agriculture (USDA), the growth in exports is due to the country’s large exportable sugar surplus and the stable demand from countries that import Brazilian sweetener. “Despite the Covid-19 pandemic and logistical obstacles at ports, including long waiting times for loading, the significant devaluation of the real against the dollar kept the Brazilian product competitive,” says the report.

See a monthly history of Brazilian sugar exports on the chart below:

Brazilian Sugar Exports (HS 1701) | Jan 2015 to Oct 2020 | WTMT

Source: DataLiner

In relation to ethanol, in September, CAMEX (the foreign trade chamber) approved a quota that allowed the import of 187.5 million liters of ethanol exempt from the 20% Common External Tariff (TEC) for 90 days, an addendum to the annual quota of 750 million liters that had expired at the end of August.

The measure, tailored for American farmers in order to please President Donald Trump in the middle of an election race, expired in December and has not been renewed. This is because the Foreign Ministry did not make progress in negotiations to expand the entry of Brazilian sugar into the United States, and Trump’s defeat in the American elections put an end to further conversations on this subject.

Coffee: despite having recorded good export numbers, logistical problems hindered coffee shipments in 2020. Datamar data indicate that there was an imbalance of almost 80,000 containers in Brazil in August. There were almost 251,000 containers leaving the country and only 172,000 arriving. In January, the arrival of 216,000 containers and the departure of 201,000 were registered. And coffee, unlike other commodities, is exported in containers. The devaluation of the real, as well as the coronavirus pandemic, boosted a strong flow of exports, but significantly reduced imports.

Nelson Cavalhaes, the president of CECAFÉ (the Brazilian council of coffee exporters), stated that in September, despite registering good numbers, “the export results could have been 10-15% better had it not been for the logistical problems of lack of containers and space on boats”.

Meat: meat exports were heated in 2020, motivated both by the competitive dollar and by the shortage of proteins in China due to the African swine flu which killed many pigs and reduced the domestic supply of meat.

According to ABPA (the Brazilian animal protein association), in the first 11 months of the year, chicken meat exports maintained a high of 0.69%, with 3.849 million tons shipped between January and November 2020 compared to 3.823 million tons in the same period of 2019. Despite this, the dollar revenue accumulated in the period is US$ 5.543 billion, a number 12.8% lower than that registered in 2019, when US$ 6.358 million was registered.

In relation to pork, in the 2020 year-to-date (January to November) figure, international sales of this protein reached 940,900 tons, a number 39.5% higher than the total shipped in the same period of 2019, 674,200 tons. And, for the first time in history, pork exports from Brazil exceeded two billion dollars, reaching US $ 2.079 billion, 47.1% more than the US $ 1.413 billion made between January and November 2019 .

According to ABPA president, Ricardo Santin, as in 2019, the health crisis of the African swine flu that impacted the swine herd in Asia, part of Europe and Africa continued to boost Brazilian poultry and pork exports. “Asian nations have consolidated themselves as the main importers of poultry and pork meat from Brazil and were the main vectors of the year’s result in both sectors,” he explains.

In the case of beef, estimates by ABIEC (the Brazilian association of meat-exporting industries) indicate that Brazil should export 2.2 million tons of beef by the end of this year. The forecast is 8.8% higher than the total for 2019. ABIEC represents 32 companies in the sector.

If the estimate is confirmed, protein exports should end the year with revenues of US $ 8.53 billion, 11.8% above that reached last year. From January to November, sales totaled 1.84 million tons, exceeding the volume registered in that interval, in 2019, by 9%. Over the last eleven months, sales grew 13.9%, reaching US$ 7.76 billion.

Despite the good numbers, the year was also marked by the suspension of exports from several Brazilian meatpackers to China and Hong Kong, who claimed to have found traces of the coronavirus in imported meat packaging, temporarily suspending the licenses of some plants, which were later reversed. China also requested greater attention not only from Brazil, but also from other meat suppliers, for disinfecting packaging and containers. The Philippines and Indonesia also ended up placing embargoes on Brazilian meat.

In 2020, there were also some market openings for Brazilian proteins: Mexico opened a market for Brazilian eggs, Myanmar for pork, Egypt for poultry, Thailand for beef and pork, and the United States for fresh beef. South Korea also started importing Brazilian shrimp.

The chart below shows a monthly history of Brazilian meat exports:

Brazilian Meat Exports (HS 0202, 0203 and 2007) | Jan 2017 to Oct 2020 | TEU

Source: DataLiner

 

Rice: Rice was a hot topic in 2020 due to the high price that reached the shelves of Brazilian supermarkets. Brazil exported so much rice that it harmed its domestic supply. Data from the SECEX (the Foreign Trade Secretariat) compiled by ABIARROZ (the Brazilian rice industry association) show that Brazilian exports of rice (husk base) totaled 153,500 tons in October, a volume 84% higher than in the same month of 2019 (83,570). In the commercial year for rice (March-October), Brazil exported 1.54 million tons of the cereal, compared to 852,240 a year earlier. According to ABIARROZ, rice exports (husk base) reached 1.69 million tons from January to October, compared to 1.08 million tons in the same period of 2019.

To contain the increase in the product in the domestic market, GECEX (the executive management committee of CAMEX (the chamber of foreign trade )) decided to zero the import tax rate for paddy and processed rice until December 31. The temporary reduction in the import tax on rice was restricted to a quota of 400 thousand tons, applicable to products covered by codes 1006.10.92 (rice with unparboiled husks) and 1006.30.21 (semi-blanched or blanched rice, not parboiled) of the Common Nomenclature Mercosur (NCM).

 

See Brazilian rice imports and exports since 2017:

Brazilian Rice Movement (HS 1006) | Jan 2017 to Oct 2020 | WTMT

Source: DataLiner

 

Soy and Corn: Soy was another commodity that Brazil exported freely in 2020, mainly to China. Data released by Chinese Customs in October indicate that China imported 51.4% more Brazilian soy in September than in the same month of the previous year. 7.25 million tons of oilseed were imported from Brazil in September, compared to 4.79 million tons in the same period in 2019, according to the agency.

As in the case of rice, external demand has caused internal shortages.

To balance the supply and demand of grains in the domestic market and to contain high prices, the GECEX decided to zero the import tax rate for soybeans and corn. In the case of soybeans, the temporary reduction will be valid until January 15, 2021 and includes NCM codes 1201.90.00, 1507.10.00, and 2304.00.10, which refer, respectively, to soybeans, soybean meal, and oil. As for corn (NCM 1005.90.10), the product was included in LETEC (the Brazilian list of exceptions to the common external tariff), with a reduction from 8% to 0%, valid until March 31, 2021.

The increase in world demand for food due to the Covid-19 pandemic generated similar reactions in the markets related to these two commodities. In the case of corn, there was an increase in domestic consumption to supply the production of animal protein, which registered growth in exports, a movement that has been registered in the last two decades at a rate of 14.3% per year. In the case of soybeans and derivatives, such as bran and oil, there was also an increase in foreign sales, which gained momentum with the appreciation of the dollar.

 

The graph below shows the history of Brazilian soy exports from 2017:

Brazilian Soy Exports (HS 1201) | Jan 2017 to Oct 2020 | WTMT

Source: DataLiner

The following graph shows corn exported by Brazil since 2017:

Brazilian Corn Exports (1005) | Jan 2017 to Oct 2020 | WTMT

Source: DataLiner (To request a DataLiner demo click here)

With the tax exemption, soy imports increased. Brazil even imported American soy, which is an unusual situation. Data released by SECEX point out that in November, Brazilian soy imports reached 122.4 thousand tons, 20 times more than in November 2019 (6 thousand tons). Purchases cost US$ 49.2 million, compared to US$ 1.9 million a year earlier, as the average value of the ton purchased increased from US$ 328.8 to US$ 402.4.

From January to November, imports totaled 748,000 tons, compared to 131,000 in the first 11 months of last year. According to SECEX, the value of purchases reached US$ 245 million, almost six times higher than in the same period of 2019 (US$ 41.1 million).

Brazilian imports of soybean oil increased by more than 8,000% in November, with Argentina offering most of what Brazil bought on the international market to deal with a shortage of raw materials.

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