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June 14, 2016

Brazilian Livestock Producers Substituting Wheat in Feed Rations

Livestock producers in southern Brazil have been scrambling for several months to find enough corn to keep their operations functioning. The scarcity of corn in Brazil has led to record high domestic corn prices while the market waits for the safrinha corn harvest to accelerate. Brazilian farmers have harvested 3-5% of their safrinha corn and the harvest pace is expected to pick up during the second half of June.

In the meantime, poultry and hog producers in southern Brazil have turned to wheat to meet some of their feed requirements. Not only are livestock producers using lower quality feed-wheat for their animal rations, they are also purchasing higher quality wheat that would normally be used for human consumption. They are not using wheat because it is cheaper than corn, they are using wheat because in some markets, there is no corn available at any price.

Current wheat prices in southern Brazil are in the range of R$ 48 to R$ 51 per sack (approximately $6.25 to $6.60 per bushel), while recent corn prices have been as high as R$ 50 to R$ 60 per sack (approximately $6.50 to $7.80 per bushel), if any corn is available.

The consulting firm Trigo & Farinhas (Wheat & Flour) reported that livestock producers purchased 220,000 tons of wheat in May to substitute for corn. A 100,000 tons of wheat came from Parana and 120,000 tons came from Rio Grande do Sul.

Large meat producers such as JBS, which is the largest meat exporter in the world and the second largest poultry producer, are reportedly purchasing wheat for their livestock operations. The company BRF, which is the largest poultry exporter in the world, has been forced to temporarily close some of their Brazilian production facilities due to the high cost of feed.

In the big picture, the amount of wheat used for animal feed is small compared to the overall wheat market in Brazil. Brazil consumes approximately 11 million tons of wheat annually while it produces 5 to 6 million tons. The deficit is generally made up with wheat imports from Argentina and Paraguay making Brazil one of the largest wheat importers in the world.