Strong dollar and suspension of port activities in Argentina concern wheat purchasers

Cepea, April 2, 2020 – Wheat supply was low in the Brazilian market in March, and the US dollar appreciation against Real continued to discourage imports. The Brazilian purchasers that had closed deals with Argentinean suppliers were concerned about the delivery of the volumes acquired, since Argentina suspend port activities, due to the coronavirus outbreak worldwide.

 

BRAZIL – The Strong US dollar – which closed at 5.196 BRL on March 31, a staggering 15.7% up in the month – and the low wheat supply in the Brazilian market kept domestic prices on the rise last month. Some mills, primarily in Paraná and in São Paulo, needed to purchase new batches in the short-term, but availability was low. Some sellers even claimed not to have batches to supply anymore.

 

The mills in the remaining regions surveyed by Cepea, in turn, seemed to have inventories enough for the mid and long terms, still, the agents from these mills were already attentive to replenishment, while sellers were away from the market. Thus, liquidity was low in Brazil in March.

 

Agents from mills claimed to have difficulties to pass on wheat valuations to the by-products, once the demand for these products was low. However, at the end of the month, the demand for wheat by-products increased, due to the needs of retailers.

 

According to Cepea collaborators, in late March, agents from some mills were waiting to replenish wheat with the product already purchased (to be delivered), while processors were trying to purchase new batches at prices not so high. On the other hand, sellers continued away from the market, and only a few deals were closed, since it is currently the off-season period for wheat crops, and trades of other grains, such as soybean and corn, have been more attractive.

 

The Brazilian Wheat Industry Association (Abitrigo) alerted, on March 26, possible issues in the supply of wheat and its by-products, due to the closure of state borders and halt in basic road services. The lack of food and mechanical services tend to affect supply. In some states, 30% to 35% of the wheat flour previously purchased had not been delivered until the end of the month.

 

(Cepea-Brazil)

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