International prices continue to drop; in Brazil, quotes are bouncing back

Cepea, August 20 2019 – Wheat prices are dropping in the international market. In the United States, not even the higher demand for their own wheat added to expectations for smaller inventories in the 2019/20 season have been able to underpin quotes. Pressure comes from lower price levels in competitor countries, such as Argentina, Australia and the European Union. In Brazil, however, the scenario is the opposite.


Prices have been rising sharply in some Brazilians regions, influenced by the possible lower supply this season – in southern Brazil, agents have already confirmed a crop failure. This context added to the recent appreciation of the US dollar and political uncertainties in Argentina are concerning Brazilian purchasers. So far, these agents are believed to buy wheat in the domestic market.


According to data from the USDA, the world wheat production in the 2019/20 crop is the highest ever, totaling 768 million tons, 5.1% higher than that in the previous season. The increase reflects the larger amounts produced in almost all wheat-producing countries, except for Brazil and Kazakhstan, which should lower their supplies by 2.4% and 6.8%, respectively.


According to the USDA, global wheat consumption should be higher in the 2019/20 season, at 758.1 million tons, 3% higher than that in the previous crop. Demand has increased mainly in the Ukraine, China and countries from the Middle East. The demand for the American wheat increased in the last months too, due to the higher interest from South American countries, such as Brazil.


In this context, global trades should surpass 182 million tons in the current season. Exports should increase in the Ukraine, Argentina and Australia, by 20.4%, 16% and 20%; as for the demand, Bangladesh, Indonesia and China may import more wheat. Concerning Brazil, so far, imports should increase by 0.8%, totaling 7.5 million tons.


BRAZILIAN MARKET – As the wheat supply has been low in the Brazilian spot market, mills are focused on the beginning of the 2019/20 crop harvesting as well as on the supply of occasional batches remaining from 2018/19. Thus, quotes have been bouncing back in Paraná, also reflecting the unwillingness of sellers to lower asking prices in the Brazilian market.


FIELD – Brazilian wheat growers continue focused on crops conditions, and some collaborators from Paraná have reported the delivery of small amounts from the new season. However, the quality of these first batches is lower, since the first crops were the most affected by frosts. In Paraná, according to data from Deral/Seab, until August 12, 60% of the crops were in good conditions, 31%, in average conditions, and 9%, in bad conditions.




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