Cepea, January 7, 2020 – Brazilian wheat quotes started 2019 on the rise, despite the higher supply in the 2018/19 season in both Brazil and Argentina. Early in the year, the imports pace was fast, and the volumes purchased remained higher than 600 thousand tons every month, in spite of the strong US dollar.
From April to the end of the first semester, wheat prices dropped in the Brazilian market, reflecting the low liquidity in Brazil. Still, wheat imports remained firm in that period. On the balance of the 2018/19 crop (August/18 to July/19), the volume imported totaled 6.75 million tons, 5.7% higher than that in the previous season (August/17 to July/18), according to data from Secex. Exports, in turn, were three-fold that in the 2017/18 crop.
Despite the decreases between April and June, the average prices in the first semester of 2019 in the states surveyed by Cepea were the highest, in nominal terms, in all Cepea series, which started in 2004.
In the second semester, wheat prices remained firm, underpinned by the unfavorable weather, which damaged part of the crops in Paraná (PR) and Rio Grande do Sul (RS). However, purchasers were away from the market – since they had inventories enough – and flour sales were low, which constrained price rises. In October, quotes dropped sharply, due to the harvesting advance and sales needs – growers needed to pay production debts. This scenario slowed down the imports pace in that period.
On the average of 2019, Brazilian wheat prices remained higher than in 2018, in nominal terms. In the wholesale market, quotes rose 2.6% in Rio Grande do Sul, 2.4% in Paraná and 9% in Santa Catarina. In São Paulo, values decreased 1.1%.
SUPPLY AND DEMAND – For the 2019 harvesting, Conab’s first estimates, released in April/19, indicated that the output would be higher than in 2018, totaling 5.63 million tons. However, due to weather issues, production estimates were revised down by 3.9%, compared to that in the previous crop, to 5.2 million tons in December/19.
In Paraná, the number one wheat-producing state in Brazil, productivity decreased 17.1% and production, 22.7%, to 2.2 million tons in the current season. In Rio Grande do Sul, on the other hand, productivity increased 9.2%, and production, 17.9%, to 2.2 million tons.
Higher supply in RS pressed down quotes more sharply compared to that in other Brazilian regions. Despite the weather issues faced by RS, supply did not decrease much.