Brazil Reactivates Domestic Support Programs as Exports to the U.S. Rise

BRASÍLIA, BRAZIL – Exports of Brazilian rice to the United States have jumped nearly 60 percent in the first two months of 2018 over the same time period last year.  On the heels of that news, Brazil has rebooted two dormant rice support policies that USA Rice says appear to be being used to push their export prices below production costs in direct violation of World Trade Organization (WTO) obligations.

Over the years, Brazil has used various domestic support programs when corn, wheat, and rice commodity prices are low, and for the first time since 2011, they have authorized the use of two programs for rice:  Premium for Product Outflow (PEP) and Equalization Premium Paid to the Producer (PEPRO).  The purpose of these programs is to move commodities from high producing areas to any of the ten grain-deficient states in the north of Brazil.  The program is not prohibited from fueling exports, however when used this way, it is a WTO violation and Brazilian rice enjoys a clear and unfair advantage.

The programs are similar in nature in that the Brazilian government guarantees a minimum price to producers by paying the difference between the prevailing market price and the government-established minimum guaranteed price, either to the commercial buyer (PEP) or directly to the producer (PEPRO).  

Brazil is the tenth largest rice exporter in the world and supplies rice to many nearby U.S. export markets, such as Venezuela, Nicaragua, Costa Rica, and Peru.

The Brazilian Ministry of Agriculture has held several rounds of auctions under these programs in the first four months of this year, purchasing more than 300,000 MT of rice. (The country typically produces 11-13 million MT of rice and exports between 0.5-1 million MT.)  Brazil’s rice exports have increased 240 percent in the first three months of 2018 over the same time period in 2017.  This is primarily due to more than 160,000 MT of rice shipments to Venezuela in addition to the increased shipments to the United States.

“Although the programs are intended to facilitate the movement of commodities within Brazil, nothing bars them from exporting the rice,” says Bobby Hanks, chairman of the USA Rice International Trade Policy Committee.  “If rice is indeed being exported under these programs, then this is a WTO violation, of great concern to us, and exactly the sort of unfair trade practices that hurt U.S. farmers and that the Trump Administration is cracking down on.”  

Hanks said USA Rice will raise the issue later this week in previously scheduled meetings with senior Administration trade officials and in Congress with committees that have jurisdiction over the issue.