{"id":1592,"date":"2019-07-24T06:02:04","date_gmt":"2019-07-24T06:02:04","guid":{"rendered":"http:\/\/commodityconversations.com\/wordpress2\/?p=1592"},"modified":"2019-07-24T06:02:04","modified_gmt":"2019-07-24T06:02:04","slug":"agricensus-report-32","status":"publish","type":"post","link":"https:\/\/commodityconversations.com\/wordpress2\/2019\/07\/24\/agricensus-report-32\/","title":{"rendered":"AgriCensus Report"},"content":{"rendered":"

ANALYSIS: Iran standoff raises corn fears after Bolsonaro backing<\/strong><\/h1>\n

It took time for Brazil\u2019s corn sector to react to the news that Brazil\u2019s national oil company, Petrobras, had refused to refuel two Iranian-flagged freighters when they called at Paranagua last week.<\/p>\n

The Bavand and the Termeh remain at anchor as of Tuesday, with Brazil shipping line up data showing the Termeh chartered by Tehran-based Arzesh to carry 66,000 mt of corn to Iran, expected to sail on August 25.<\/p>\n

It is part of a flotilla of vessels that are loading 715,300 mt of corn, plus a cargo each of pellets and low protein meal, in the next six weeks \u2013 the tip of what has been a very successful export story for Brazil\u2019s corn sector.<\/p>\n

To date, this year Iran has soaked up over 2.5 million mt of Brazilian corn, with the origin stepping in where others have hesitated in the face of increased international restrictions.<\/p>\n

Over the past five years, Iran has become the biggest single customer for Brazilian corn and 2019 imports already outpace Vietnam \u2013 the next biggest importer \u2013 at a ratio of 2:1.<\/p>\n

While those restrictions haven\u2019t been directed at food, the fear that a lucrative trade could be sacrificed to political alliances has spooked some of the country\u2019s corn exporters.<\/p>\n

\u201cPetrobras has claimed that if it enables the tankers to get its fuel, they risk getting blacklisted as well, for breaking sanctions. President Jair Bolsonaro in turn has pledged loyalty to the US,\u201d one market source said, and it is that connection that has struck a chord.<\/p>\n

\u201cThis must be a Bolsonaro thing, he loves Trump,\u201d a second market source said, with fears that the new president\u2019s attempts to curry favour with his US counterpart will potentially leave Brazil\u2019s corn trade sacrificed.<\/p>\n

\u201cThe problem is that Iran is our biggest buyer of corn\u2026 (Bolsonaro) is not stupid, but yes, the fear (for corn exports) exists,\u201d a second market source said.<\/p>\n

There are factors that mitigate some of the perceived risk, however, with domestic politics and trading practicalities underpinning hopes the fate of the Bavand and the Termeh is an isolated one.<\/p>\n

\u201cIt\u2019s nothing to do with Bolsonaro,\u201d a Brazil-based broker said, citing instead some of the domestic fallout from Brazil\u2019s own anti-corruption ‘lava jato’ investigations and the rare involvement of two Iranian-flagged vessels.<\/p>\n

\u201cThere are still sellers willing to do Iran, but Iran will have to pay a premium. Today it is between 20 and 25 cents\/bu on the sell side,\u201d the broker added, with bids adding a 5-10 cent premium.<\/p>\n

And, while Bolsonaro has said his government is aligned with Washington on Iran sanctions, the worst-case scenario would be a pledge to curtail corn exports to Iran.<\/p>\n

Such a step would spark a huge domestic backlash, according to one agriculture analyst.<\/p>\n

\u201cOur agriculture representatives and senators, who are very strong \u2013 Bolsonaro depends on their goodwill to approve everything in Congress \u2013 would tell him, politely, that Brazil needs to export corn to Iran. He\u2019d reconsider,\u201d the analyst said.<\/p>\n

\u201cIran is covered from Brazil out to September, so it\u2019s not a big deal at the moment,\u201d the broker said, and from there Ukraine and the Black Sea corn harvest becomes available.<\/p>\n

Tipping point<\/p>\n

While the imminence of the Black Sea corn harvest may change the dynamic, Ukraine\u2019s own reaction to the imposition of sanctions could provide some pointers towards the potential issue facing Brazil.<\/p>\n

Sellers in Ukraine, despite marshalling the biggest corn harvest in the country\u2019s history and at a time when Russia\u2019s corn harvest was badly hit by drought, have found their appetite to sell to Iran declining with the imposition of US sanctions.<\/p>\n

Between January and May 2019, Ukraine exported around 777,365 mt of corn to Iran according to Ukrainian government figures, down 12% on the same period of 2018, and down 19% on the same period of 2017.<\/p>\n

Wider bilateral trade between the two nations is also an Achilles heel, and Iran is not above tit-for-tat tactics, as British-flagged oil tankers discovered in the Straits of Hormuz this week.<\/p>\n

\u201cThis can be the tipping point for Iran \u2013 if it blocks Brazilian corn\u2026 they may turn to Argentina or pay more for Ukraine. Iran is the third biggest meat importer from Brazil and Brazil imports a lot of urea from Iran as well,\u201d the first source said.<\/p>\n

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