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February 5, 2019

Wheat plays Key Role in Trade between Brazil and Argentina

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

Even though Brazil has greatly expanded its agricultural production in recent years, there is one crop where it has not been able to reached self-sufficiency - wheat. Brazil only produces about half its domestic wheat needs and it imports the remaining wheat mostly from Argentina.

Last week, Conab released the results of a study analyzing the importance of wheat trading between Brazil and Argentina. It turns out that wheat plays a critical role in trading relations between the two countries.

The extent of manufactured goods exported from Brazil to Argentina is quite diverse with automobiles, auto accessories, and electronics being some of the principal items. In contrast, the items exported from Argentina to Brazil are much less diverse. In recent years, almost half of Argentina's exports to Brazil are composed of 16 products with wheat and flower accounting for approximately 10% of the total

Brazil would need to export at least 50 different products to Argentina in order to reach the same level of importance as Brazil's importation of Argentine wheat.

Brazilians consumes approximately 11 million tons of wheat annually, but the 2018/19 Brazilian wheat production is only estimated at 5.4 million tons. Over 90% of Brazil's wheat is grown in the three southern states of Parana, Santa Catarina, and Rio Grande do Sul. The biggest hurdle for wheat production in southern Brazil is the potential for heavy rains during the wheat harvest in October and November. Wet weather during harvest often times results in poor quality wheat that may only serve as animal rations instead of human consumption.

According to the Brazilian Exterior Secretary (Secex), between 1997 and 2017, approximately 77% of Brazil's wheat imports came from neighboring Argentina.