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April 17, 2020

Winter Wheat Planting in Southern Brazil off to a Timid Start

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Farmers in southern Brazil are in the early stages of planting their 2020 winter wheat, but dry weather could complicate their planting plans. The state of Parana is the largest wheat producing state in Brazil followed by Rio Grande do Sul and these two states combined produce more than 90% of Brazil's wheat.

The early wheat planting in Parana is getting off to a timid start. According to the Department of Rural Economics (Deral), the wheat in Parana is 1% planted and the early planting has been characterized by dry conditions, but the state did receive some rain earlier this week.

Deral estimates that the wheat acreage in Parana will increase 5% in 2020 to 1.8 million hectares and that the wheat production could hit 3.5 million tons, which would represent an increase of more than 40% compared to the disappointing crop of 2019. Deral is estimating that the wheat yield in Parana this year will be 3,240 kg/ha (48 bu/ac) or 39% higher than 2019.

Farmers in Parana are coming off a good soybean season with generally good yields and very high soybean prices so they were willing to invest some of their profits into their wheat crop. Domestic wheat prices in Brazil are also very good. According to data from the Center for Advanced Studies in Applied Economics (Cepea), at the start of April, the price of wheat in Brazil was 7% to 23% higher than the average price of wheat during April of 2019.

The outlook for wheat producers in the state of Rio Grande do Sul is much more pessimistic. A severe drought during the 2019/20 growing season resulted in a cut in soybean yields of 45% to 50%. The resulting loss of income from their soybean crop has made farmers in the state reluctant to invest heavily in a second crop of wheat.

Historically, when farmers in Rio Grande do Sul lose money on their first crop of soybeans, they pull back and reduce their investment in the second crop of wheat to avoid a second loss. According to the coordinator of the Wheat Commission of the Agriculture Federation for the state of Rio Grande do Sul (Farsul), the 2020 wheat acreage in the state may be unchanged from last year at 730,000 hectares.

Not everyone agrees with that assessment. Other analysts are more optimistic and feel that farmers in the state will increase their wheat acreage by 5% to 10%.