August 27, 2012

Brazil to Import 6.7 Million Tons of Wheat in 2012/13

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

The wheat harvest in Parana should start in about 15 days and continue through November. If the weather remains favorable, the state is expected to produce 2.2 million tons, which would be 11% less than in 2011. Farmers in the state reduced their wheat acreage by 26% in favor of more safrinha corn production. The total wheat production in Brazil in 2012 is expected to be 5.3 million tons or down 8% from a year earlier.

In order to meet domestic demand, Brazil is expected to import 6.7 million tons of wheat in 2012/13. Traditionally, Argentina is the primary source of imported wheat into Brazil, but due to reduced acreage of wheat in the country, Argentina will probably only be able to export 5 million tons to Brazil. Therefore, Brazil will need to import approximately 1.7 million tons of wheat from outside of Mercosul.

If they can't import enough wheat from Argentina, Brazil usually looks to Russia or Australia for additional supplies, but the wheat production in both of those countries has also been impacted by adverse weather as well.

A shortage of wheat from Argentina will probably result in improved prices for Brazilian producers as long as they avoid rainy weather during harvest. Excessive rainfall during harvest can result in poor quality wheat in Parana and Rio Grande do Sul, the two largest wheat producing states in Brazil. According to the State Secretary of Agriculture in Parana (Seab), a sack of wheat (60 kilograms) is currently selling for R$ 30 which is 20% more than the R$ 25.68 it was selling for in August of 2011.

The president of the Parana Syndicate of Wheat Industries (Sinditrigo) Marcelo Vosnika, expects the Brazilian wheat crop to be of high quality this year and the prices to rise above the guaranteed minimum of R$ 30 per sack. The industry is not too concerned about higher prices because they will be able to pass along the increase cost to the consumers.

If corn prices remain robust, farmers in Parana could reduce their wheat acreage even more in 2012/13 as they opt for additional safrinha corn production.