Cepea, January 15, 2021 – Brazilian agents are carefully watching the major factors that influence wheat imports: availability of high-quality product in the domestic market, international prices and the dollar.
In general, international prices depend on the supply/demand ratio in the world. As regards Argentina, the seventh wheat-exporting country in the world, prices are related to both external factors and domestic commercial and tax policies (the government may opt for limiting sales).
As Argentina is the major wheat supplier to Brazil, the US dollar is a decisive factor to importers. The Focus Report from the Central Bank estimates the American currency will continue higher than 5.00 BRL in 2021, which tends to keep imports expensive.
In the Brazilian market, with the slight increase in the domestic supply because of the end of the harvesting, prices tend to drop, since many farmers need to make room in warehouses for the summer crop. Still, with domestic quotes at nominal records in 2020, the current low supply of high-quality wheat added to the needs of processors to replenish inventories may keep imports high.
Data from Conab (Brazil’s National Company for Food Supply) estimate that Brazil should import 6.8 million tons of wheat between August/2020 and July/2021, leading to a domestic availability of 13.2 million tons, up from the 13 million tons from the previous season.
Thus, in order to meet the demand from the domestic market and bring some relief to processors, Camex (Foreign Trade Chamber) renewed the quota of 750 thousand tons of wheat imports from out of Mercosur that can be exempted from the Common External Tariff (TEC), of 10%.
As regards the area allocated to wheat in 2021, on the one hand, the possible decrease in the wheat supply from Argentina, high price levels for the Brazilian product and the delay in the ideal period for sowing the second crop corn in Paraná, São Paulo and Mato Grosso do Sul may lead farmers to increase the wheat area. On the other hand, the attractive prices of corn may lead farmers to produce this cereal, even later than the ideal, rather than wheat.