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March 22, 2019

Brazil may Import 750,000 Tons of Duty-Free U.S. Wheat Annually

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

Brazil only produces enough wheat to meet about half of its domestic needs and it imports the remainder, mostly from Argentina. Brazil generally needs to import 6-7 million tons of wheat annually.

At a recent meeting between President Bolsonaro of Brazil and President Trump, it was announced that Brazil and the United States are working on a tentative agreement for Brazil to import 750,000 tons of U.S. wheat annually without having to pay the 10% tariff that is customary for wheat imports coming from outside of the Mercosul trading block.

If the agreement is finalized, the American wheat would be exported to mills in northern Brazil. For mills north of the Port of Santos, it is currently cheaper to import wheat from Argentina than it is to truck in wheat or flower from the traditional wheat producing regions of southern Brazil. Approximately, 98% of the wheat imported into northern Brazil is from Argentina and the mills generally have on hand about 30-45 days of stocks.

The cost of importing wheat into northern Brazil would be about the same if it came from the Unites States or Argentina even though the freight costs would be cheaper from the U.S. The freight costs from the U.S. would be in the range of US$ 18 per ton compared to US$ 23 per ton from Argentina. For the mills in northern Brazil, it would probably be at the desecration of individual mill operators as to where they want to originate the wheat.

U.S. wheat would not be imported into southern Brazil because Argentine wheat is cheaper and the mills in southern Brazil only import wheat when the local supply is inadequate or if the locally grown wheat is of inferior quality. Imported wheat from Argentina is only used to complement the wheat produced locally in southern Brazil.

In exchange for importing more wheat from the U.S., the Brazilian government is requesting that more fresh beef and sugar from Brazil be allowed into the U.S. Allowing more fresh beef from Brazil into the U.S. is a possibility, but allowing more sugar probably will not happen, at least not any time soon.