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April 22, 2014

Wheat Production in Argentina and Brazil could Rebound in 2014

After disappointing wheat crops in both Brazil and Argentina in 2013, the wheat acreage in both countries is expected to rebound in 2014. The problem with last year's wheat crop in Brazil was caused by a series of frosts that negatively impacted the developing wheat in the state of Parana. In Argentina, the problem was a prolonged period of hot and dry weather while the crop was in its reproductive phase.

Due to stronger wheat prices and improved weather conditions, the wheat acreage and production in both Argentina and Brazil is expected to rebound in 2014. The expected increase in the 2014 wheat acreage in Argentina ranges from 5% to 17%. In 2013 there were 3.6 million hectares of wheat in Argentina and most analysts estimate that approximately 4 million hectares will be planted in 2014. The Minister of Agriculture reported that 9.2 million tons of wheat was produced in 2013 and that is expected to increase to 11.5 to 12.0 million tons in 2014.

The wheat acreage in Argentina had been declining in recent years due to government interference in the wheat export market. In 2013/14, the government limited the amount of wheat allowed to be exported as a way to help hold down surging domestic inflation, currently estimated as high as 30%. In previous years, as much as 5 million tons of Argentine wheat was exported to Brazil, but that fell to just 1.5 million tons in 2013/14 due to government restrictions.

The restrictions resulted in an oversupply of wheat in the domestic market and lower prices and the lower prices convinced many farmers to cut back on their wheat acreage.

Improved weather and stronger wheat prices are once again raising hopes for Argentine wheat producers. Heavy rains over the last several months have recharged the soil moisture across Argentina that was depleted by a severe drought last December and January. The improved moisture should lead to ideal planting conditions for the crop that will start to be planted in May. The anticipated larger wheat crop is also raising hopes that the government may ease export restrictions for wheat.

Brazilian farmers are also looking at the strong wheat price as a justification for increasing their 2014 wheat acreage. In the state of Rio Grande do Sul the wheat acreage is expected to increase 10% to 1.1 million hectares while in the state of Parana it is expected to increase 23% to 1.2 million hectares. If the weather cooperates, the total Brazilian wheat crop in 2014 may reach 7 million tons. Brazil's largest wheat crop was recorded in 1987/88 when 6.1 million tons were harvested. The domestic demand for wheat in Brazil is approximately 11 million tons.

If the Argentine government does not ease restrictions on wheat exports, Brazil would need to look once again to nations other than Argentina for their wheat imports. During 2013/14 the United States surpassed Argentina as the major supplier of wheat to Brazil. Paraguay and Uruguay are increasing their wheat production, but these two countries do not produce enough wheat to meet Brazil's needs. If Argentina does not ease restrictions, Brazil would need to import as much as 3.5 million tons of wheat from outside of Argentina.

The 2014 wheat crop in Brazil will be planted in May and June and the crop will start to be available for the domestic market starting in September.