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June 5, 2018

Brazilian Farmers are finally selling their Wheat at a Profit

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

Brazilian farmers are reporting something relatively rare in recent years - profits on their wheat production. According to the consulting firm Trigo & Farinhas, farmers are reporting profits of 5-69% on last year's wheat crop and they are expecting profits of 10% or more on their 2018/19 wheat production.

The state of Parana is the largest wheat producing state in Brazil and the Department of Rural Economics (Deral) estimates that the average cost of production in the state is R$ 38.07 per sack if the yield is 48 sacks per hectare (approximately $4.25 bu/ac). In the city or Ponta Grossa in eastern Parana, millers are currently offering R$ 48.00 per sack (approximately $5.90 per bushel), which would equate to a profit of approximately 26% over the average cost of production.

Using average yields and the current average price in the various states, the profits for old crop wheat are estimated at 5% in Santa Catarina, 10% in Rio Grande do Sul, 14% in Minas Gerais, 20% in Parana, 47% in Mato Grosso do Sul, and 69% Sao Paulo.

The outlook for the current crop that is being planted is equally as positive. Millers in Parana are offering R$ 48.00 per sack for new crop wheat delivered in October (approximately $5.90 per bushel), which would equate to potential profit of 26%. In Rio Grande do Sul, millers are offering R$ 40.00 per sack which would equate to a profit of 5%.

Farmers are selling their old crop wheat for better prices than they expected just a few months ago. Trigo & Farinhas are advising their clients to forward contract as much wheat as possible for September or October delivery in order to lock in these potential profits.

The Department of Rural Economics (Deral) reported last week that 69% of the wheat in Parana had been planted compared to 70% last year. Deral rates the wheat crop in Parana as 6% poor, 24% average, and 70% good.