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October 15, 2012

Adverse Weather Results in Smaller Brazilian Wheat Crop

In their most recent evaluation of the Brazilian wheat crop, Conab estimated that Brazil will produce 5.0 million tons of wheat in 2012 or 4% below their estimate in September and 13.5% less than last year. Over 90% of Brazil's wheat is produced in just two states; Parana and Rio Grande do Sul. The wheat in Parana is approximately 60% harvested and in Rio Grande do Sul, the wheat harvest is just getting underway.

The wheat acreage in Parana declined 27% this growing season as farmers in the state opted for more safrinha corn production. In Rio Grande do Sul, the farmers actually increased their wheat acreage by 4.7% because of the strong wheat prices and a lack of alternative major crops to grow during the winter.

The reduction in Brazil's wheat estimate came mainly from adverse weather in the state of Rio Grande do Sul and the estimate could go even lower. The wheat crop in Rio Grande do Sul has been impacted over the last several weeks by heavy rains, strong winds, hail, and several episodes of freezing temperatures. Next week Conab will conduct additional surveys to ascertain how much damage has been done to the crop. Local estimates put the losses at between 10% and 20%, but if there is a period of excessive rainfall in the state during harvest, the loses may be higher.

Farmers in Brazil who produce good quality milling wheat should have no problem selling their wheat for good prices. For those farmers whose wheat is of poorer quality, they may need to sell it as feed wheat for much lower prices.

Brazil is expected to export as much as 1.25 million tons of wheat shortly after harvest and then import 6.7 million tons of wheat later in the cropping year to meet domestic demand. If wheat production in Rio Grande do Sul falls even further, then either exports will be curtailed or imports will increase.