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April 10, 2012

Wheat Acreage Continues to Decline in Parana

The state of Parana is traditionally the leading wheat producing state in Brazil, but wheat acreage in the state has fallen 33% since 2009 as farmers plant more safrinha corn after harvesting their soybeans. In 2009, farmers in the state planted 1.3 million hectares of wheat, but wheat acreage has fallen to only 0.87 million hectares in 2012.

Farmers are reducing their wheat acreage due to a lack of profitability growing wheat. At the time they need to sell their wheat, the domestic price of wheat for the last two years has been below the cost of production. At the same time, the domestic price of corn has strengthened and since both crops compete for the same acreage, many farmers say they only plant wheat if they were not able to plant safrinhaRt corn or another winter crop.

As a result, Brazil has been forced to import more than half of the 11 million tons of wheat needed for domestic consumption with the vast majority coming from Argentina. Wheat is the only major crop for which Brazil is not self-sufficient.

At a recent Wheat Forum held in Parana that brought together more than 300 farmers and industry representatives, the Brazilian Minister of Agriculture, Mendes Ribeiro, stated that Brazil is prepared to place limits on the amount of wheat that can be imported from Argentina as a way prevent wheat acreage from falling even further.

For the last several years the problem has been that millers in southern Brazil could purchase wheat from Argentina at prices lower than the minimum price guaranteed by the Brazilian government. Even including the cost of transportation, it was cheaper to bring in wheat from Argentina than to purchase it in the domestic market. This forced farmers to either sell their wheat to local millers at a loss or to sell it to the government at auctions held by the government. Farmers do not like these auctions because they are slow and cumbersome and they do not offer the needed liquidity.

While the Minister stated that they are prepared to control the amount of wheat being imported into Brazil, he did not give any details concerning how that would be accomplished.