March 28, 2011

Farmers in Rio Grande do Sul to Plant More Wheat, Less in Parana

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

After farmers in southern Brazil finish harvesting their soybeans, the next decision they must make is what "winter crop" they will plant. In northern Parana, it appears they have decided to plant more safrinha corn, but in Rio Grande do Sul where safrinha corn is not an option; farmers apparently have decided to plant more wheat. During the 2010/11 growing season, farmers in Parana planted 53% of Brazil's wheat acreage while the farmers in Rio Grande do Sul planted 37% of Brazil's wheat acreage.

The Agriculture Federation of the State of Rio Grande do Sul estimates that the farmers in the state will increase their wheat acreage by 15% in 2011/12 to slightly over one million hectares. If farmers in the state do plant the increased acreage, that would bring the wheat acreage in the state back to where it was two years ago.

Increased optimism for wheat production is based on two factors. First, the wheat produced in Rio Grande do Sul last year was very good quality, which is the type of wheat demanded by Brazilian millers. Farmers are now very confident that they will be able to continue producing high quality wheat for the domestic market. Secondly, wheat prices are now very good and farmers are expecting wheat prices to remain strong due to potential supply problems around the world. In fact, the price of wheat in Rio Grande do Sul is above the minimum price set by the government and it is expected to stay above the minimum price through 2011.

Brazil is the second largest wheat importer in the world after Egypt and most of Brazil's imported wheat comes from Argentina. There are concerns though about potential supply problems in some of the other major exporting countries such as the U.S., Canada, and Russia and if those supply problems actually materializes, wheat prices should remain supported.

In contrast to Rio Grande do Sul, farmers in Parana are expected to reduce their wheat acreage in 2011/12. According to the Secretary of Agriculture for the state of Parana, wheat acreage in the state is expected to decline by 11% in 2011/12 to just over one million hectares. The reason for the decline is the fact that farmers in northern Parana have opted to plant more safrinha corn and less wheat. If that occurs, the wheat acreage in the two states will be about equal, which is the first time that has happened in many years.