Brazil sees spate of corn contract washouts, threatening exports, traders say


By Ana Mano and Nayara Figueiredo, Reuters  

July 15, 2021


SAO PAULO, July 15 (Reuters) - Weather-related problems with Brazil’s second corn crop have sparked a spate of companies exiting their contracts on washout clauses, causing what some traders described as potentially the biggest wave of export cancellations for the world’s No. 2 supplier in five years.


According to grain traders and brokers who spoke to Reuters on condition of anonymity, a lot of the corn earmarked for exports is being redirected to the domestic market as premiums are attractive due to shortfalls after the crop was hit by drought and an ill-timed frost.


“It will be really difficult to execute corn contracts,” said a trader at a large U.S. firm. “After crop failure ... firms are doing washouts when possible.”


In a grains contract, a party can get out of it by paying a settlement amount to a counterparty, a mechanism known as a washout.


A second grain trader at another big U.S. firm said its export program was cut on supply shortage fears..