Corn exports threatened as Brazil sees wave of “washouts” in corn contracts

Brazil is the second-largest global supplier of corn, but weather problems during the second corn crop caused some companies to cancel their export contracts by actioning the “washout” clause so they could sell in the domestic market. This has led to what operators described as possibly the largest wave of shipment cancellations in five years.

According to traders and grain brokers interviewed by Reuters on the condition of anonymity, a large part of the corn that would be destined for export is being redirected to the domestic market, as premiums are attractive due to the crop failure caused by droughts and frost. Demand remains high by the meat industry for animal feed.

The chart below shows a comparison of Brazilian corn imports vs. exports since 2019. Data are from DataLiner:

Brazilian Corn Imports vs. Exports | Jan 2019 to May 2021 | WTMT

Graph source: DataLiner (click here to request a demo)

“It’s really going to be very difficult to execute (contracts for) corn,” said an operator for a large US company. “It broke the entire crop. Trading companies are doing “washout” when possible.”

In an advance grain sale agreement, one of the parties may exit the negotiation by paying a settlement amount to the counterparty, in a mechanism known as a “washout.”

Source: Novacana

To read the full original article, visit the link:

https://www.novacana.com/n/milho/brasil-onda-washouts-contratos-milho-exportacoes-ameacadas-160721

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