Area should be larger in BR; government reduces tariff on wheat imports to zero

Cepea, July 2, 2020 – The high price levels for wheat in the Brazilian market influenced two important changes in the productive chain in June. The federal government approved an additional quota of 450 thousand tons of wheat imports that can be exempted from the Common External Tariff (TEC) to non-Mercosur countries.  Low inventories in Mercosur and the harvesting advance in the Northern Hemisphere influenced this scenario too. As regards crops, the current high price levels for wheat in Brazil encouraged growers to increase the area allocated to the cereal this season.

 

Despite the dollar appreciation against Real last month, the daily imports average increased. According to data from Secex, until the third week of June, the daily average for wheat imports was at 23.1 thousand tons, against 22.1 thousand in June last year.

 

CROPS – The weather in southern Brazil favored crops development in June, and, now, estimates point to an increase in crops yield and production.

 

According to Seab/Deral, in Paraná (PR), wheat sowing had reached 89% of the area estimated for the state until the end of June. Of the crops already sown, 88% were in good conditions, 10%, in average conditions, and 2%, in bad conditions.

 

Thus, production estimates were revised up to 3.672 million tons, according to Deral. If these estimates are confirmed, supply should be a staggering 71.5% higher than that last season. The area sown with wheat in PR should total 1.13 million hectares, meaning that the area may grow by 16.4% compared to that last year. Supply estimates will only be confirmed if yield hits 3.25 tons per hectare, against 2.21 in 2019, 47.4% higher.

 

In Rio Grande do Sul (RS), until June 25, wheat sowing had reached 74% of the area forecast for the state in 2020, according to Emater. Weather conditions favored wheat sowing in RS last month.

 

With crops development in southern Brazil, wheat trades (related to next crop) were stepping up in the Brazilian market in late June. According to Seab/Deral, 9.5% of the output forecast for PR had been sold until the end of the month – until May, that percentage was at 5.7%. It is worth to mention that the volume marketed earlier in that state has never been so high. Thus, Cepea surveys show that wheat prices increased in June in most regions surveyed by Cepea, boosted by low supply in Brazil and the dollar appreciation against Real.

 

(Cepea-Brazil)

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