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June 5, 2014

Wheat Planting Pace in Southern Brazil Varies by Location

The planting pace for the 2014 wheat crop in southern Brazil has been quite variable depending on location. The two major wheat producing states are Parana and Rio Grande do Sul and in Parana the planting pace has been accelerated. According to the Secretary of Agriculture in Parana (Deral), approximately 66% of the wheat has been planted as of the end of May, which is one of the fastest planting paces in recent years.

Cold weather has swept into the state in recent days with frost being reported for two nights in a row in parts of the state. Two percent of the wheat in the state has already started to flower, but the temperatures were not believed to be cold enough to cause any significant damage to the crop. Future outbreaks of cold weather could be a problem for the crop as more of the wheat enters its reproductive phase. The wheat in Parana will be harvested generally in September and October.

In contrast, wet weather has slowed the planting progress of wheat in Rio Grande do Sul. Emater (the state’s extension service) is reporting that only 3% of the wheat in the state has been planted compared to 5% last year. Wet weather in western Santa Catarina has also slowed planting progress in that state as well. The wheat in Rio Grande do Sul will be harvested in October and November.

The Agriculture Federation of the State of Rio Grande do Sul (FARSUL-RS) recently petitioned the state government to reduce once again the ICMS tax on wheat. The ICMS tax is a tax on any merchandise or commodity that crosses state lines in Brazil. Last year the tax was lowered from 12% to 8% and FARSUL-RS is asking for the tax to be lowered again to 2%. They want a lower tax to make wheat from Rio Grande do Sul more competitive with wheat from neighboring Parana and the U.S. especially when it is sold in big cities such as Sao Paulo.

Including transportation and taxes, wheat from Rio Grande do Sul is currently being sold in Sao Paulo for an average price of R$ 825 per ton. With the proposed reduction in ICMS tax, the average price would fall to R$ 785 per ton putting it on par with soft red wheat imported from the U.S. or Uruguay.

They feel the lower tax would also stimulate the demand for new crop wheat in the state, which in turn could stimulate increased production. Farmers in the state will continue planting wheat through the end of June, so improved price prospects could still bring in some additional acreage. Wheat prices in Brazil have been declining in recent weeks in light of slumping international prices and the prospect of potential record wheat production in Brazil.