March 21, 2016

Wheat Acreage in Brazil may Decline again in 2016

Wheat is the one major crop in Brazil that has not benefited from Brazil's continued agricultural expansion. Brazil produces only about half of its domestic wheat needs and the situation shows no signs of improvement in 2016. Farmers in Brazil will start planting their 2016 wheat crop in about a month and it is possible that they will once again reduce their winter wheat acreage.

The Brazilian government has not yet released any official estimates for the 2016 wheat crop, but the Center for Advanced Economic Studies (Cepea) is expecting a reduction in wheat acreage in 2016 which could led to more wheat imports and higher domestic bread prices.

Brazilian farmer's confidence in wheat production has eroded in recent years due to: low prices, high cost of production, adverse weather resulting in low yields, wet weather during harvest causing quality concerns, competition for acres from safrinha corn, and a lack of strong governmental support for wheat production.

One of the biggest problems for wheat production in Brazil is competition for acreage from safrinha corn. Safrinha corn production and winter wheat production don't completely overlap the same geography, but there is overlap in the state of Parana and farmers in that state have opted in recent years to plant more safrinha corn because of the strong domestic corn prices in Brazil. In 2015, farmers in Parana planted approximately 1.3 million hectares of wheat or about 54% of Brazil's 2.4 million hectares of wheat. Since wheat yields in Parana are generally higher than in the rest of the country, Parana produced about 60% of Brazil's wheat crop last year.

Wet weather in southern Brazil during the wheat harvest is another recurring problem for wheat producers. The wet weather can result in very poor quality wheat which may only be suited for animal feed, which was the case for the last two growing seasons. Brazilian scientists feel one way to get around the problem of wet weather during harvest is to produce irrigated wheat in the cerrado areas of central Brazil.

Embrapa's research indicates that the best time to plant irrigated wheat in central Brazil would be between April 10 and May 30 with the ideal time being during the first half of May. If they plant the wheat too early, there is an increased risk from the wheat blast disease which would require additional fungicide applications. If they plant too late, there is increased risk from wet weather during harvest.

While irrigated wheat production in central Brazil holds promise, the irrigated wheat acreage in central Brazil is expected to be only 110,000 hectares in 2016 or less than 5% of Brazil's total wheat acreage.