May 20, 2011

Wheat Planting in Parana Surpasses 50%

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

Farmers in Parana planted approximately 9% of the 2011 wheat crop last week and the total planting progress now stands at 55% of the estimated 1.03 million hectare crop. At the current pace, the wheat crop in Parana should be all planted in about three weeks. Of the crop that has emerged, 87% is rated in good condition and 13% is rated in average condition.

Parana is the leading wheat producing state in Brazil and it is expected to produce 2.85 million tons of wheat in 2011, which if realized, would be 57% of Brazil's expected wheat production. The state of Rio Grande do Sul is the second leading producer and wheat planting is also underway in that state as well. In both of these states, the farmers will plant soybeans after the wheat is harvested in October or November.

Of all the major food products in Brazil, wheat is the main grain in which Brazil is not self sufficient. To meet the domestic demand, Brazil must import significant amounts of wheat from Argentina and lesser amounts from Uruguay and Paraguay. Conab is currently estimating that Brazil will produce 5.3 million tons of wheat in 2011 and that the country will import 5.9 million tons of wheat to meet the domestic demand.

Farmers in southern Brazil generally struggle to produce a high quality wheat crop. Occasional frost during the growing season or heavy rainfall during harvest is some of the hurdles farmers must overcome. For the first time in several years, the wheat crop produced in 2010 was of superior quality, but due to the strong Brazilian currency, millers in southern Brazil purchased wheat from Argentina at a cheaper price than what they could purchase from local producers. As a result, many silos are still full of last year's production.

In an attempt to increase wheat production and to reduce Brazil's dependence on imports, the federal government has been trying to give incentives for increased wheat production. One of those programs is a subsidized program of crop insurance that reduces the cost of growing wheat in southern Brazil and increasing the margins on wheat. The cost of the program is being picked up by both the state and federal government.