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October 11, 2013

Wheat Crop in Brazil Continues to Disappoint

Wheat is the only major grain for which Brazil is not self-sufficient and wheat millers in Brazil continue to be frustrated by the country's inability to produce larger amounts of high quality wheat. The two top wheat producing states in Brazil are Parana and Rio Grande do Sul, but both states seem incapable of consistently producing good wheat crops year after year. Last year the problem was Rio Grande do Sul where the production was cut nearly in half due to heavy rains at harvest and now this year the problem is Parana.

The reduced wheat production in Parana is the result of a series of frosts that occurred in June and July that severely impacted the wheat. The farmers in the state planted 25% more wheat in 2013 and the total production at the start of the growing season was expected to be 2.9 million tons. Unfortunately, a series of frosts in June and July severely impacted the wheat and the crop is now only expected to be 1.7 million tons or 18% less than last year when the state produced 2.1 million tons. Currently the wheat harvest in the state is approximately 50% harvested and it is expected to be completed by the end of November.

With half of the wheat in the state still not harvested, there could be additional problems with the wheat if heavy rainfall delays the harvest any further.

Recently Brazil has been importing wheat from the United States due to shortages of wheat in Argentina, which is Brazil's traditional supplier. The wheat crop in Argentina won't be harvested until November and in the meantime, Brazil must source its wheat from outside of South America which makes it more expensive because of the higher tariff for wheat from outside Mercosul.

The price of wheat in Parana reached R$ 50 per sack of 60 kilograms during September or approximately UD$ 10.30 per bushel.