BRASÍLIA, BRAZIL – To stabilize prices and move excess rice stocks, Brazil’ s Ministry of Agriculture has announced a plan to restore its Premium for Product Flow (PEP) and Equalizer Premium Paid to the Producer (PEPRO) programs.
The National Supply Company (CONAB), a public company under the Ministry of Agriculture, announced the allocation of nearly $57 million USD to support prices and the flow of production, of which nearly $20 million will go directly to administering PEP and PEPRO with the remaining going towards government acquisitions of approximately 600 thousand metric tons of rice.
Over the years, Brazil has implemented various domestic support programs, such as PEP and PEPRO, when commodity prices are low, and was last used for rice in 2018 (see
USA Rice Daily, April 11, 2018). The purpose of these programs is to move commodities from high producing areas in southern Brazil to grain-deficient states in the north. The two 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).
By encouraging the flow of product, Brazil aims to stabilize domestic availability and prevent localized shortages. However, the program is not prohibited from fueling exports, and when used this way, is a World Trade Organization (WTO) violation.
“We have been concerned over the lack of oversight and accountability to ensure these programs do not allow exported rice to benefit. Of notable concern is the largest rice producing state, Rio Grand du Sol, has the largest port,” said Bobby Hanks, Louisiana rice miller and chair of the USA Rice International Trade Policy Committee. “If rice is in fact being exported under these programs, this is the exact type of unfair trade practices we expect the Trump Administration will address in any trade negotiations.”
Brazil is the eighth largest rice exporter in the world and supplies rice to many of the top U.S. export markets, such as Mexico, Costa Rica, Venezuela, and the Dominican Republic.
At the request of USA Rice, the U.S. government will raise questions and concerns with Brazil at upcoming WTO meetings in Geneva.