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April 22, 2019

Wheat Production in Parana could impact U.S. Wheat Producers

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

The cropping sequence in Brazil allows farmers to plant two and sometime three crops per year. As an illustration, since the farmers in the state of Parana in southern Brazil have finished harvesting their soybeans, they have now started to plant their 2019 winter wheat crop. The state of Parana is responsible for more than 50% of Brazil's wheat acreage and the amount of wheat produced in Parana could impact U.S. wheat exports.

Brazil generally only produces about half of the wheat it needs to meet domestic demand. The remainder, which is generally about 7 million tons, is imported primarily from Argentina. For wheat imported outside of the Mercosur trading block (Brazil, Argentina, Paraguay, and Uruguay) there is a 10% duty. As a result, the U.S. generally does not export much wheat to Brazil, but that might change going forward.

As part of a trade agreement with the U.S., Brazil recently announced that they will allow 750,000 tons of duty-free wheat imports from outside the Mercosur trading block and American exporters hope to get much of that business. Therefore, the fate of wheat production in Parana could impact U.S. wheat producers.

Farmers in Parana have started to plant their 2019 winter wheat, but planting wheat in Parana is not a straight forward proposition. In order to qualify for crop insurance and other government programs, farmers must plant their wheat within a defined window when there is the least amount of potential risk to the crop. The risks include dryness during stand establishment, frost during flowering, and rain during harvest.

To achieve the minimum amount of risk (a 20% chance of significant yield reductions), the ideal planting window for wheat in Parana can vary from March 21st to July 31st. The state of Parana has distinct climate zones so plating generally varies by region and by the maturity of the wheat - short, medium, and long maturities.

In simple terms, wheat planting in northern and northwestern regions of the state starts at the end of March, in western Parana it starts in mid-April, in the higher elevations of eastern Parana it starts late April or early May, and in the colder regions of southern Parana it is planted mid-June to early July.

Agronomists in Parana recommend to farmers that they plant their wheat in stages separated by 10-14 days in order to reduce their risk from frost, hail, dryness, or excessive rainfall during harvest.

Winter wheat must compete with safrinha corn for acreage in Parana, so farmers must decide which crop they should plant and when. It is not an easy decision because it depends on a complex calculation involving commodity prices, input costs, weather, exchange rates, and date of planting.

In general terms, it is probably better to plant safrinha corn in northern Parana due to generally low wheat yields. In central and southern Parana, wheat is probably the best option due to chances of frost impacting late planted safrinha corn. In western Parana the decision is more difficult.

It depends on when the second crop is planted and the desire of farmers to plant their next crop of soybeans as early as possible. Soybeans are the main crop in Parana with the second crops being "icing on the cake." Farmers want to do everything possible to facilitate soybean production and generally farm revenues are higher if they plant their soybeans early enough to allow for an early planting of a second crop of either wheat or safrinha corn. Farmers in Parana can start planting soybeans on September 10th, so they have to judge which second crop will be harvested in time to allow their soybeans to be planted as early as possible.