A trading firm owned by Agriculture Minister Blairo Maggi`s family has been the biggest winner from Brazil`s corn subsidies this year, underscoring the tensions between the billionaire farm magnate`s political responsibilities and his investments.
Since the launch of corn subsidies in May, the Maggi family`s trading company, Amaggi Exportação e Importação Ltda, has made 70 percent of the purchases under the so-called PEP program, according to a Reuters analysis of data from Brazilian crop authority Conab.
Subsidies are assigned via competitive auctions and there is no evidence of Maggi steering them to his company. However, the results highlight an unusual situation in Brazil, where the country`s top agriculture official is also a major player in the market.
The subsidies are ultimately aimed at supporting Brazilian farmers and ensuring their harvest reaches markets.
Traders say Brazil`s centre-right government raised eyebrows with a decision to start offering the so-called PEP subsidy this year only in Mato Grosso, Maggi`s home state and the base of operations for Grupo Amaggi, whose growth since the 1990s earned him the nickname "Soy King."
One result of the decision was that Amaggi was in a prime position to ship the subsidized harvest, while rivals Cargill Inc and Archer Daniels Midland Co
In 2010, when Brazil last offered the same corn subsidy but in a much broader swath of the country, Bunge Ltd
The trading companies declined to comment on the contrast.
The Agriculture Ministry said decisions about crop subsidies were made by a body grouping its own officials as well as representatives from the Finance Ministry and the office of the president, "based on purely technical criteria," according to a written statement.
The decision to start corn subsidies this year in Mato Grosso was triggered by unusually low corn prices there, the ministry added. The program was expanded this week to other states due to falling prices.
The results of an auction held on Thursday were not yet publicly available.
"Amaggi vehemently refutes any hypothesis that it received any prior information about the auctions," the company said in a written statement. "The conditions for participating are uniform, objective and pre-established, applying equally to all market participants."
Amaggi said the minister, while still a shareholder of its holding company, had separated himself from any function in the group since beginning his political career. Maggi was governor of Mato Grosso from 2003 to 2010 and senator from 2011 until he took over the Agriculture Ministry in May 2016.GLOBAL GLUT
Brazil`s PEP subsidies for corn totaled 51 million reais ($16 million) this year through July 13 - a small sum beside Amaggi`s $3.44 billion in revenue last year.
Still, subsidies in the program can reach a fifth or more of the price paid by traders. Corn prices have been hit this year by a glut in global supplies, although dry weather in the United States that damaged crops prompted a mild recovery this week. [nL3N1KC1DN]
Amaggi`s trading desk shipped about 1.5 million tonnes of Brazilian corn last year, compared with a total crop of 66.5 million tonnes in the 2015/16 season, according to Conab.
Mato Grosso, Brazil`s top-producing state, harvested 15.3 million tonnes of corn last season, the data showed.
Conab raised its 2016/17 forecast for Brazilian corn output this month to a record 96 million tonnes due to a bumper second crop planted in January after the soybean harvest. [nL1N1K20BH]
The PEP crop support program has run almost weekly reverse auctions in which trading firms bid the lowest subsidy they will accept to ship corn they buy at a minimum government-set price.
Another form of subsidy for Brazilian corn, known as PEPRO, allows farmers to receive compensation for selling their corn below the government`s minimum price.
Subsidies in that program this year totaled 177 million reais through last week, but payments have been far less concentrated due to large numbers of small producers.
The agriculture minister`s family participated in that program through farming unit Agropecuaria Maggi Ltda, which sold 3 percent of the corn in those subsidized operations - the second-largest total of all participants. Conab does not report the trading firms involved in PEPRO-subsidized transactions.
($1 = 3.13 reais)
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