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The US is turning to Brazil for help with corn supplies as low stocks and the worst drought in half a century haunt the world’s leading grain exporter.

Meat companies including top pork producer Smithfield Foods have arranged to ship Brazilian corn to the US east coast as it has become cheaper than rations from the US corn belt, according to people familiar with the transactions.

The situation – analogous to Saudi Arabia importing oil – underscores how anxious buyers of corn, particularly the livestock, poultry and ethanol industries, have become, as 88 per cent of the domestic crop struggles in drought-hit regions.

“This is not something that happens – a boatload of corn coming in for use in US feeding operations. This is an unusual thing,” said Erick Erickson, director of global strategies at the US Grains Council, a Washington-based export promotion group.

Records from Piers, a ports database, show 2008 was the last year foreign bulk corn arrived on the US mainland and then it was in the form of seeds, not animal feed.

Traders say meat companies along the US east coast can obtain Brazilian corn at a $12 per tonne discount to US corn. Chicago corn futures soared to a record $8.24½ per bushel last week, or $324 per tonne.

The US is by no means out of the grain export business. The latest estimates from the US Department of Agriculture suggest US farmers will supply 40 per cent of the corn traded on the global market.

International merchants still selling what is left of last year’s US crop are in fact growing nervous about slowing export volumes as the drought lowers water levels on the Mississippi river, the main exit route for grains on their way abroad.

But as the US endures its worst drought since 1956, Brazil has enjoyed a bumper corn crop and is pricing exports competitively. A shortfall in Brazilian soyabeans has also made room for corn in its ports, analysts say. USDA forecasts Brazil will export 14m tonnes of its record 70m tonne harvest.

Alysson Paolinelli, former Brazilian minister of agriculture and head of Abramilho, the national association of corn producers, said: “Brazil is becoming more and more competitive in corn,” adding that farmers had learnt how to grow a second corn crop in the first few months of the year on the back of early soya harvests.

“The US produces almost six times more corn than Brazil, but the US has already used up a lot of its land and if Brazil can offer a good price…and we can improve our logistical problems, I think we can become a big exporter, including to the US,” he said.

David Nelson, global strategist at Rabobank, said: “We’re looking at a dislocation. If you’re a buyer of grain, it’s extremely complicated right now.”

Copyright The Financial Times Limited 2017. All rights reserved.
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