August 22, 2014

Wheat Prices in Brazil fall to Below Minimum set by the Government

As farmers in Parana start to harvest what is hoped to be a record large 2014 wheat crop, the price of wheat in the state has fallen to below the minimum price set by the government. Approximately 2% of the wheat in the state has been harvested and already wheat prices in the northern and western regions of the state are in the range of R$ 33 per sack of 60 kilograms (approximately US$ 6.18 per bushel) while the minimum set by the Brazilian government is R$ 33.45 per sack (approximately US$ 6.91 per bushel). According the Secretary of Agriculture in the state of Parana, the cost of production for wheat in the state is R$ 37 per sack (approximately US$ 7.64 per bushel).

Farm organizations in the state have already petitioned the Minister of Agriculture to set up a series of auctions known as the Pepro Program to subsidize the sale of as much as 40% of the wheat in the state. Without a Pepro Program for wheat, the domestic price for wheat is expected to continue declining as the harvest progresses.

The state of Parana is the leading wheat producing state in Brazil and it is expected to produce a record large wheat crop of 4.0 million tons in 2014. The wheat acreage in the state increased 35% this year due to better prices for winter wheat compared to safrinha corn. Farmers in the state can choose between winter wheat or safrinha corn for their second crop following soybeans and they opted to reduce their safrinha corn acreage and instead plant more wheat. The wheat harvest in the state is very extended and farmers in the state will not complete the wheat harvest until later in November or even early in December.

The second largest producing state is Rio Grande do Sul where an estimated 3 million tons of wheat will be produced. These two states combined produce 90% of Brazil's wheat crop estimated at 7.5 million tons in 2014 or 2 million more than in 2013. Conab is estimating that Brazil's wheat imports will decline to 5.5 million tons in 2014/15 compared to 6.6 during the previous year.