Low supply of high quality wheat and US dollar appreciation push up quotes in BR

Cepea, November 19, 2019 – Brazilian wheat growers stayed away from the national spot market in the first fortnight of November, focused on the weather in Brazil, Argentina and the United States. Cepea collaborators from Rio Grande do Sul (RS) State are worried, since excessive rains have lowered crops’ productivity and quality – part of the output may even not be considered wheat.


Data from Emater indicate that part of the wheat already harvested in RS has lower quality and crops’ pH is lower than 75. This scenario added to the US dollar appreciation pushed up wheat quotes in most Brazilian regions in the first half of the month – it is worth to mention that a strong US dollar makes imports more expensive, increasing the dispute for the Brazilian product.


Between October 31 and November 14, prices rose 0.7% in the over-the-counter market of Paraná (PR), but dropped a slight 0.3% in RS. In the wholesale market, quotes increased 1.1% in RS, 3.9% in PR and 1.1% in São Paulo. In Santa Catarina (SC), values remained stable in the fortnight.


In RS, data from Emater show that, until Nov. 14, 80% of the area had been harvested. As regards the wheat still in the field, 18% of the crops were in the maturation stage and 2%, in the beans-filling stage. In PR, according to Deral/Seab, until November 11, harvesting had reached 95% of the area, and 86% of the crops were in good conditions and 14%, in average conditions.


In SC, harvesting was beginning, but growers did not seem very interested in fixing prices. The weather was firm in the fortnight, favoring fieldwork. Apparently, according to Cepea collaborators, high rains in previous weeks did not lower crops quality and productivity.


SUPPLY AND DEMAND IN BRAZIL – On a report released on Nov. 12, Conab (National Company for Food Supply) indicated new productivity decreases, to 2.59 tons per hectare, 2.7% lower than that in the previous crop. As regards the Brazilian output, estimates are at 5.28 million tons, 2.8% down compared to that in the previous season. This decrease is linked to weather issues during crops development. The state where production decreased the most (-20.5%) was PR: from 2.8 million tons last crop to 2.3 million tons in the current season – in this case, the area sown and productivity decreased 6.8% and 14.8%, respectively. Compared to that in October, however, productivity and production in Brazil increased 2.7% and 2.5%.


Domestic inventories (initial inventories + production + imports) are forecast at 13.1 million tons. Consumption estimates were revised down to 12 million tons, and exports, to 400 thousand tons, with ending stocks (July/20) at 673.6 thousand tons.


IMPORTS – Still according to Conab, in October, Brazil imported 607.1 thousand tons of wheat, most (63.76%) from Argentina, followed by the United States (15.19%), Russia (9.97%), Paraguay (8.9%) and Uruguay (2.15%). The average price, at 138.6 million USD, is 16.5% lower than that in the same period last year. Conab indicates that the strong US dollar may limit purchases from other countries, estimating imports at 6.8 million tons until late July 2020.





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