Brazil Suspends Rice Import Tariffs Amidst Flood Crisis

Brazil has temporarily suspended tariffs on rice imports until the end of the year in response to devastating floods in Rio Grande do Sul, the country's leading rice-producing state, according to a report published by S&P Global on Tuesday.

The measure, which came into effect immediately, aims to mitigate potential rice shortages and curb rising domestic prices following the floods, which caused significant damage to crops and infrastructure.

"The measure will enable the government to prevent acute shortages of the Brazilian staple food and potentially force rising domestic prices lower in the wake of deadly floods in Rio Grande do Sul state, which grows two thirds of the country's rice," the S&P Global report states.

The tariff suspension applies to non-parboiled and polished rice, eliminating the usual 9% to 10.8% tariffs on imports of these rice varieties. The government has also suspended a planned tender for the purchase of up to 104,000 metric tons of milled rice, originally intended to bolster domestic supplies and control prices.

The decision to suspend tariffs has sparked controversy, with rice producers' associations expressing concerns about potential losses and the impact on future planting decisions. Farmers have called for a cap on tariff-free imports to protect the domestic market from an influx of cheaper rice from other countries.

"It could cause significant problems (with no cap) because Asian prices are more competitive," one exporter told S&P Global. "The retail sector can buy pre-packed rice from other countries and that could jeopardize the (local) mills that do this."

While exporters acknowledge the impact of the floods, they argue that the extent of the damage remains uncertain and that most of the rice crop had been harvested prior to the disaster. They also note that current high export prices for Brazilian rice, ranging from $880 to $1,000 per metric ton, make it difficult to compete with cheaper options from other suppliers.

The situation in Brazil's rice market remains fluid as the country grapples with the aftermath of the floods. The tariff suspension provides a temporary measure to address potential shortages and price pressures. However, the long-term impact on the domestic rice industry and the balance between imports and domestic production remains to be seen.

"We believe it will take a couple of weeks to be kind of normal," one exporter remarked to S&P Global, highlighting the ongoing uncertainty and challenges facing the sector.