Dry weather delays sowing in the 2018 season; importations increase

Cepea, May 16, 2018 – Wheat sowing started in Paraná in the second fortnight of April, but activities are still slow, due to the drought in southern Brazil. Because of this delay, wheat area may be smaller this season in both Paraná and Rio Grande do Sul States. Concerned about the weather, farmers retracted from the market, underpinning the upward trend of wheat quotes in Brazil. Trades, in turn, have been occasional, since supply of high-quality wheat is low. Besides, some purchasers closed new trades only to replenish inventories in the short-term.

 

As for sowing, in Paraná, only 7% of the area had been sown until May 11, according to Deral/Seab, nearly 20 percentage points behind the same period last year, Growers from that state have reported that it has not rained since early April. Of the wheat already sown, 50% of the crops are in good conditions.

 

According to data from Conab (National Company for Food Supply), until May 10, only 13 thousand hectares had been sown in Paraná, way lower than in the previous season, when 120 thousand hectares had been sown in the same period. According to Cepea collaborators, if it does not rain in the coming days, the crops that would be sown out of the ideal period may be damaged or growers may give up sowing wheat, reducing the total area.

 

In Rio Grande do Sul, sowing has not started yet, but some growers are getting ready to start the activity. According to Emater, higher price levels may encourage farmers to invest in wheat. Conab estimates the area to be sown in the 2018/19 season to total 699.2 thousand hectares in Rio Grande do Sul, with an average productivity at 1.88 kilos per hectare. In São Paulo and Santa Catarina, farmers are concerned about the dry weather – activities in these states should only start when it rains again.

 

As for the total wheat area in the 2018/19 season, Conab estimates it at 1.99 million hectares, 4.2% larger than that in the previous crop. Productivity is forecast at 2.44 kilos per hectare, 9.7% up in the same comparison.

 

BY-PRODUCTS – Prices for wheat by-products increased in the first fortnight of May as well. Agents from mills believe price rises are linked to the valuation of raw material. Weakened demand, however, limited by-products price rises.

 

INTERNATIONAL – Data released on May 10 by the USDA indicate global wheat production at 758.4 million tons in the 2017/18 season, 0.2% smaller than that forecast in April, but 1.07% larger than the previous season. Consumption, in turn, may total 743.81 million tons, only 0.09% higher than that forecast in the previous report and 0.67% above that last crop.

 

Trades in the 2017/18 season were revised down by 0.41% compared to the previous report, to 183.66 million tons, influenced by lower exportations, mainly to Australia, Argentina and the United States. Still, importations from countries such as Iraq and Morocco continue to increase. The stock/consumption ratio is at 36.4%, reflecting higher consumption.

 

Besides, the first estimates for the 2018/19 season indicate production may be smaller. According to the USDA, global supply will total 747.8 million tons, pressed down by lower production in India, Morocco and mainly Russia. Compared to the 2017/18 season, the decrease is at 1.4%. Global trades in the 2018/19 season, however, should total 187.56 million tons, 2.12% higher than in the current season. That reflects higher demand from African countries. In that scenario, the stock/consumption ratio is expected to be at 35.2% in the next season. Consumption is expected to be higher than production in the next six years.

 

IMPORTATIONS – Wheat importations continue to increase in Brazil, reaching the largest volume of the year in April. Despite dollar rises and higher transportation costs, firm demand in the Brazilian market and uncertainties regarding the national output in the next season boosted purchases. Still, higher importations last month were not enough to limit price rises in the domestic market.

 

Data from Secex indicate that, between March and April, wheat importations increased a staggering 43.4%, totaling 665.68 thousand tons last month. Of all the volume imported, 98.6% came from Argentina and 1.4%, from Paraguay. With dollar average at 3.41 BRL in April, importation price was 667.17 BRL per ton FOB (Free on Board), against 620.10 BRL per ton in March. This season (August/17 and April/18), importations have totaled 4.65 million tons, volume 17% lower than that between August/16 and April/17 (5.62 million t).

 

As for exportations, in April, Brazil shipped 27 tons of wheat, 99% down compared to March. This year, sales to the international market have totaled 165.3 thousand tons, 70% down compared to the same period last year. This season (Aug/17 to Apr/18), Brazil has exported 207.59 thousand tons, 63% down compared to the nine first months last season, according to Secex.

 

In the by-products segment, wheat flour importations decreased 13.7% in April, to 29.4 thousand tons. Between August/17 and April/18, Brazil purchased 304.7 thousand tons of that product from the international market, 1.6% less than in the same period last season. Wheat flour exportations decreased sharply in April as well: 62.8% compared to March, to 1.06 thousand tons. In the first nine months of the current season, Brazil shipped 11 thousand tons of the product, 45% up compared to the period between Aug/16 and Apr/17.

 

(Cepea-Brazil)

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