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October 30, 2014

Brazilian Wheat Harvest Expected to be Disappointing

The wheat harvest in southern Brazil is underway with approximately three quarters of the crop harvested in the state of Parana with the harvest just beginning in the state of Rio Grande do Sul. These two states produce approximately 93% of Brazil's total wheat crop.

The Department of Rural Economics for the state of Parana (Deral) indicated that approximately 75% of the wheat in the state has been harvested compared to 60% at the same time last year. The wheat harvest in the state started out slower than normal due to heavy rains in early October, but dryer weather over the last several weeks has allowed the harvest pace to accelerate.

Deral had originally estimated that the wheat crop in Parana would yield 2,952 kg/ha (approximately 42.8 bu/ac) and that the total production would be 3.99 million tons. Both of those estimates are now considered to be too high, but the final estimates are not expected until the harvest is complete.

The earlier harvested wheat in Parana had lower quality due to the frequent rains in early October, but the quality has improved as the harvest progressed. Of the wheat harvested thus far in Parana, the quality is rated 77% good, 21% average and 2% poor.

In the state of Rio Grande do Sul the wheat harvest is just getting started, but there are already concerns that there will not be enough storage for the new crop. The problem is that there are 300,000 tons of old crop wheat still stored in the state. Even if the current wheat crop comes in under earlier expectations, the large carryover stocks are going to cause storage problems.

Heavy rainfall in recent weeks is expected to reduce the quality of the wheat and grain elevator operators in Rio Grande do Sul are worried that they will have difficulty keeping the good quality wheat and the poor quality wheat separated.

Farmers in the state have been reluctant to sell their old crop wheat due to the local market prices being below the cost of production. The government has tried to support the wheat prices by conducting two Pepro auctions on October 7 and 16, but the wheat subsided in those auctions were from the states of Parana, Mato Grosso do Sul, and Sao Paulo. On October 30th, another Pepro auction will be conducted for wheat from Rio Grande do Sul.

Conab is estimating that the 2014 Brazilian wheat crop will be 7.6 million tons, but heavy rainfall especially in Rio Grande do Sul is expected to result in lower production. In 2013, Brazil produced 5.5 million tons of wheat.