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Pressure for Brazilian wheat imports is increasing

Pressure for Brazilian wheat imports is increasing

Pressure for Brazilian wheat imports is increasing – particularly from origins outside South America – even as rains continue to improve prospects for the next harvest.

“Low supply and good demand” for wheat are continuing to drive Brazilian wheat prices higher, research institute Cepea said, reporting values in Parana, the top producing state, ending May at a fresh two-year high of R$834.69 ($230.71) a tonne.

The increase took the rise in Parana prices last month to 9.0%, with wheat now 25% more expensive than a year ago.

In Rio Grande do Sul, the second-ranked wheat producing state, prices rose by 13.3% last month to $778.36 ($215.14) per tonne, up 29% year on year.

‘Could lose 10m tonnes of exports’

The price rise reflects largely “demand from the animal feed industry”, Cepea said, underlining the squeeze on corn supplies after a record Brazilian export programme last year.

Hopes of a return by Brazil to ample corn supplies, given the onset of the safrinha or second-crop harvest, have been hurt by the prospect of disappointing yields, thanks to persistent dryness in major growing areas.

Brazilian corn prices rose by 9.2% last month, taking year on year gains to 113%, thanks to the harvest shortfall, which is seen as putting the dampeners on Brazil’s export programme this year.

“Some are anticipating that Brazil could lose 10m tonnes of [corn] exports,” said US broker Benson Quinn Commodities.

‘Out of Mercosur’

For wheat, however, in which Brazil is a structural importer, Cepea said its sources were expecting “an increase in” purchases.

Expectations are particularly strong of imports of wheat from origins “out of Mercosur”, given the “low supply of quality wheat” for sale by Argentina, the main exporter of the grain within the South American trade bloc.

Argentina, like Brazil, saw late rains damage the quality of its latest harvest.

Brazilian importers typically, in the absence of readily available Argentine wheat exports, turn to North America for purchases – and indeed there is talk within US markets of the sale to Brazil of three cargos of US hard red winter wheat supplies.

That would follow a depressed period for US sales to Brazil, with shipments as of mid-May – with only two weeks left of the US 2015-16 wheat marketing year – down 71% year on year at 450,000 tonnes.

Germany is another non-Mercosur origin that Brazil has historically turned to for supplies of higher quality wheat.

‘Good development of crops’

The comments came even as rains boosted prospects for the next Brazilian wheat harvest, undertaken late in the calendar year, after early sowings were delayed, and sometimes cancelled, by the same dryness which hit safrinha corn yields.

“Rains in most producing areas have favoured cereal culture and encouraged producers,” Cepea said.

“In Paraná and São Paulo, where wheat lost area to second crop corn, precipitation is contributing to the good development of crops already sown.”

Conab, the official Brazilian crop bureau, has pegged this year’s domestic wheat harvest at 5.83m tonnes, a rise of 291,000 tonnes year on year, despite a 14.1% tumble to 2.10m hectares in expected plantings.

The production forecast assumes a yield up 23% at 2.77 tonnes per hectare, returning in line with long-term average levels.

(Source – http://www.agrimoney.com/news/pressure-rises-on-brazil-to-import-wheat—from-the-us–9606.html)

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