One-off increase in supply presses down quotes in some Brazilian regions

Cepea, July 16, 2020 – Wheat prices were weaker in some of the Brazilian regions surveyed by Cepea in the first fortnight of July, primarily in the wholesale market (trades between processors). Pressure came from the one-off increase in supply in the domestic market, since some sellers tried to sell the inventories remaining from last season. Besides, the mills in Paraná lowered bidding prices, due to the higher competitiveness of the wheat from Rio Grande do Sul.

 

It is worth to mention that, until late June, the firm Brazilian demand for wheat by-products and higher imports costs had been pushing up quotes for wheat grain and its by-products. The more attractive prices led wheat growers to increase the area allocated to wheat in the 2020 season. In Paraná, estimates point to a sharp supply increase.

 

EXPORTS – According to Secex (Foreign Trade Secretariat), in June, Brazil imported 434.1 thousand tons of wheat, 7% less than that purchased in May, but 3.3% more than that imported in June/19. Of the total volume imported by Brazil last month, 79.6% came from Argentina, 13.8%, from the United States, 4.1%, from Uruguay, and 2.5%, from Paraguay. Imports price averaged 230.00 USD per ton, 3% higher than that in May/20, but 2.3% lower than that in June/19.

 

CROPS – Wheat sowing is ending in southern Brazil, and, so far, the weather has been favorable, keeping agents optimistic about production in the current crop.

 

The cyclone that hit southern Brazil in late June did not affect wheat crops, since the development stage was almost over. Thus, Conab (Brazil’s National Company for Food Supply) estimates the area allocated to wheat to be 13.7% larger, which may result in an output of 6.3 million tons in the 2020/21 crop, higher than the 5.7 million tons produced in the previous season. Higher production is linked to the harvest in Paraná, which increased by 40.7%. Conab forecasts wheat imports to total 7 million tons, and exports, 350 thousand tons, both lower than that in the previous season. Thus, ending stocks should decrease to 100.6 thousand tons, the lowest in the last years.

 

According to data from Seab/Deral, wheat sowing has reached 97% of the area in Paraná State. Of the crops already sown, 90% are in good conditions, 8%, in average conditions and 2%, in bad conditions.

 

In Rio Grande do Sul, according to Emater, sowing had reached 95% of the area until July 9. In the last days, activities were hampered by rains.

 

(Cepea-Brazil)

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