March 29, 2012

Wheat Acreage in Parana to Decline for Third Year in a Row

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

With safrinha corn as a better option, farmers in Parana are reducing their winter wheat acreage for the third year in a row in favor of additional safrinha corn production. According to a survey of cooperatives conducted by the newspaper Gazeta do Povo, farmers in the state may reduce their wheat acreage by as much as 19% in 2012. Their study indicated that 850,000 hectares of wheat would be planted in the state compared to 1.05 million hectares planted in 2011. Going into this growing season, the state of Parana was the largest wheat producing state in Brazil, but it could lose that ranking to Rio Grande do Sul, if these reductions take place.

safrinha corn and wheat generally compete for the same acreage in the central and northern part of the state. safrinha corn is planted immediately after the soybeans are harvested in February or March, whereas the winter wheat is generally planted in April or May.

There are a lot of problems associated with winter wheat production in Parana including: lower yields, poorer quality, low prices, and a lack of liquidity when it comes time to sell the crop. For the last several years, farmers in the state have been forced to sell their wheat at prices that are lower than the minimum price set by the government. Wheat in the state is currently being sold for R$ 24 per sack of 60 kilograms while the minimum price set by the government is R$ 28.60 per sack.

In order to obtain the higher minimum price, farmers must sell their wheat to the government at a series of auctions. This is a slow and cumbersome process which offers very little liquidity to the farmers. In contrast, the demand for corn is very strong and a farmer can sell his corn at any time he chooses. The price of corn, which is R$ 22.80 per sack, is lower than the price of wheat at R$ 24.60 per sack, but safrinha corn generally has a yield twice as high as that of wheat.

The anticipated 200,000 hectare reduction in Parana's wheat acreage will instead be planted as safrinha corn. The safrinha corn acreage in the state is expected to set a new record at 1.9 million hectares. In some micro-regions of the state, winter wheat production has practically disappeared.

Last year, Brazil produced 5.3 million tons of wheat and imported 5.7 million tons making it one of the largest wheat importers in the world. The imported wheat comes primarily from its neighboring countries, principally Argentina. Argentine farmers can produce wheat at a much cheaper price and the wheat is generally of higher quality as well. As a result, millers in southern Brazil have been able to purchase wheat from Argentina at lower prices than if they purchased domestic wheat and milled it themselves.

In contrast to Parana, farmers in Rio Grande do Sul have been increasing their wheat acreage over the last several years. In 2011, farmers in the state planted 870,000 hectares of wheat and that is expected to increase again in 2012. The climate in the state is not suited for safrinha corn production so wheat remains the principal crop to be grown during the colder periods of the year.