May 11, 2015

If the Weather Cooperates, Brazil could produce Record Wheat Crop

With a very successful summer growing season behind them, the farmers in Rio Grande do Sul in southern Brazil are now turning their attention to planting their winter wheat crop. After a disastrous 2014 growing season during which the state lost a million tons of wheat due to torrential rains during harvest, farmers in the state are expected to cut back on their wheat acreage in 2015. According to estimates from Emater, farmers in the state will reduce their wheat acreage by 19%, but they are still expected to produce 36% more wheat this year compared to the disaster in 2014.

In recent weeks, retailers in the state have indicated a decline in demand for seed, fertilizers, and chemicals for the impending wheat crop. Domestic wheat prices in the state are down 23% compared to last year, but the guaranteed minimum price set by the government was actually increased this year by 4.5% to R$ 34.95 per sack for producers in southern Brazil.

The increase in the minimum price was not as much as farmers had hoped for, but it will help to offset the expected 15% increase in the cost of producing the wheat in 2015. In the state of Parana for example, the price of wheat at harvest time is expected to be R$ 35 per sack while the cost of production in the state is estimated at R$ 31 per sack.

Emater is estimating that farmers in Rio Grande do Sul will plant 950,000 hectares of wheat compared to the 1,180,000 hectares planted in 2014. Potential wheat yields in Rio Grande do Sul are estimated by Emater at 2,400 kg/ha (approximately 34.8 bu/ac). Other analysts are more optimistic and they anticipate that farmers will plant one million hectares and that the yields will be 2,900 kg/ha (approximately 42 bu/ac). The reason for their optimism is because they feel El Nino will reduce the possibility of heavy rainfall during harvest, which can have a profound negative impact on wheat production.

Some farmers in southern Rio Grande do Sul may actually plant more wheat this year for rotational purposes because they increased their soybean acreage in 2014/15.

The states of Rio Grande do Sul and Parana combined produce approximately 90% of Brazil's wheat and in the best case scenario, these two states may produce 7.0 million tons of wheat in 2015. If the weather cooperates, Brazil's total wheat production might hit 7.5 million tons in 2015, which if achieved, would be a new record production.

Farmers in Rio Grande do Sul are just getting started on planting their wheat, while farmers in Parana have planted 30% or more of their winter wheat. The wheat in Rio Grande do Sul is generally planted during May and June and harvested in November or early December. The wheat in Parana is generally planted in May and harvested in October.