Boerenbusiness analysis
Tax on maize could halve imports
Europe is closing the border to maize. At least, the foreign supply is slowed down by a hefty import levy. At first glance, the measure comes out of the blue. Although there is certainly something to be said for it, now that the Brazilian granaries are literally flooding and the US is also raking in record yields.
The European Commission has immediately imposed an import duty on maize, rye and sorghum. The levy is €5,16 per tonne and also applies to freight already en route to the European Union. The levy on maize is particularly striking. This is an important raw material for the feed industry. In addition, the past proves that import duties on maize have a significant impact.
Imports fluctuate
Europe is the third largest importer of maize in the world in 2017 after Mexico and Japan. European production this year will amount to approximately 15 million tons, an increase of 15,5% compared to last year. The European import of maize has quite a few peaks, both upwards and downwards. Imports increased by 2010% in 167. And 4 years later, in 2014, imports plummeted again by more than 44%. Not without reason, by the way.
The largest corn producers in the world are the US, China and Brazil. China does not play a role in the world market and consumes almost everything itself. The US and Brazil, on the other hand, are by far the largest exporters of maize. It is precisely in these countries that the 'corn price' is under pressure due to a large supply.
Storage problems in Brazil
Arable farmers in the Brazilian province of 'Mato Grosso' harvest this year 29,5 million tons of maize. That is an increase of 55% compared to last year. In that year Brazil still had a maize shortage, which meant that pigs had to be slaughtered even earlier. The government estimates the storage capacity at 33,5 million tons. So more than enough. The problem, however, is that many of these warehouses are still full of soy, of which record quantities have also been brought in this year. So Brazil can't do much else than dump maize on the world market.
Brazilian arable farmers have no storage for their maize harvest. (Photo: Juliano Manhaguanha)
Cheap Corn in USA
Corn is also available in the US at bargain prices, at just over $150 per tonne. This while the maize price has often exceeded $200 per ton, and even $300 per ton in recent years. In the United States, considerable maize stocks are stored after the record harvest, of more than 384 million tons, last year. The maize harvest is about 7% lower this year, but that is still good for the third highest production ever. In other words, overproduction. A price crisis in the US can only be averted if the demand for corn increases dramatically.
The solution is to use more maize for bioethanol. However, there is much resistance to this solution, because producing and transporting bioethanol costs almost as much energy as it yields. Therefore, exporting corn to the world market seems the most obvious solution to shrink US corn stocks.
Stronger euro
It should not be underestimated that the euro has appreciated considerably in just a few weeks. In April the euro was still worth $1,05, in mid-August the price is moving around $1,17. The cheaper dollar, in combination with the low maize price, makes it interesting to import American and Brazilian maize to Europe.
That's why import tax
Brussels probably already sees the storm coming and expects a flood of maize to be shipped to Europe. That is why the European Commission has decided that the imported maize will be taxed. Brussels supports the European maize price by taxing every tonne of maize imported with €5,16.
Such measures do not lie. An average ship entering the port of Rotterdam can easily have 50.000 tons on board. Multiply this by the stated import duty and the freight suddenly becomes tons more expensive. Then the (South) American maize is suddenly not so cheap anymore.
Such import duties are not new, however. In July 2014, for example, Brussels applied a comparable import duty, because the duty-free quota had already been exceeded by then. In that year, European imports were 'accidentally' almost halved. An import tax therefore helps a lot, as the past proves.
Wouter Job
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