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September 13, 2011

Wet Weather Could Negatively Impact Brazilian Wheat Production

The forecast for heavy rains later this week across southern Brazil has producers in Parana and Rio Grande do Sul worried that the quantity and quality of the developing wheat crop could be negatively impacted. These two states account for over 90% of the wheat produced in Brazil.

In Parana the wheat is filling grain and maturing and 20% of the crop has already been harvested. In Rio Grande do Sul the crop is generally filling grain and the start of harvest is still several weeks away. The heaviest rains are predicted for the state of Rio Grande do Sul and if it stays wet for an extended period of time, the concern is that fungal diseases may get out of control impacting the quantity of wheat produced. In the state of Parana the concern is about the quality of the wheat. If the wheat is mature and ready for harvest, the quality of the crop can quickly deteriorate if it stays wet for more than three days.

Brazilian producers always have a difficult time producing high quality wheat due to the potential of heavy rains at harvest time. More often than not, a significant portion of the wheat produced in Brazil ends up as feed wheat instead of high quality wheat needed by local millers.

Conab has already reduced its Brazilian wheat forecast to 5.14 million tons, which is 12.5% less than last year. The domestic wheat consumption in Brazil is estimated at a little more than 10 million tons which means that approximately half of the wheat consumed in Brazil will be imported. Argentina is the largest supplier of imported wheat and Brazilian millers have taken advantage of the strong Brazilian currency in recent years to purchase wheat from neighboring countries at a lower cost that from local producers. Since the distances are relatively short, the cost of transporting Argentine wheat into southern Brazil is relatively low.