Strong dollar makes imports more expensive and underpin prices in BR

Cepea, February 18, 2020 – Wheat prices have resumed increasing in all the Brazilian regions surveyed by Cepea. The boost came from the low domestic supply and the strong US dollar, which make imports more expensive – on February 12, the American currency hit a nominal record, at 4.347 BRL.

 

In this scenario, while sellers increased asking prices, purchasers were cautious about closing new deals – these agents claim to have wheat stocked and to have batches previously purchased to receive.

 

In Argentina, wheat prices dropped earlier in the month. Thus, the price of the product imported from Argentina and delivered to Paraná and Rio Grande do Sul States decreased to levels similar to prices in Brazil. However, as the US dollar is strong, prices for the Brazilian wheat continue more attractive to purchasers.

 

SUPPLY AND DEMAND – Sowing of the next wheat crop should start in April in Brazil, according to a report released by Conab (Brazil’s National Company for Food Supply) on February 11, and area is expected to continue stable. Conab revised up imports estimates to 7 million tons, but reduced exports estimates to 300 thousand tons, due to the low domestic supply. This scenario changed the wheat availability in Brazil (12.9 million tons) and ending stocks (850.6 thousand tons).

 

In a report released by the USDA on February 11, the world wheat production in the 2019/20 crop was revised down to 763.9 million tons, 0.1% down compared to that estimated in January, but 4.4% up compared to that in the 2018/19 season.

 

World trades were revised up to 183.3 million tons, with higher demand from China, Turkey and Thailand. Higher exports from Kazakhstan, the European Union and the United States more than offset lower shipments from Canada. World inventories estimates were kept at 288 million tons.

 

EXPORTS – According to data from Secex, in January, Brazil imported 647.8 thousand tons of wheat, 0.4% less than that purchased in December/19, but 3.6% more than the volume imported in Jan/19. Of this total, 95% came from Argentina, 3.1%, from Paraguay, and 1.9%, from the United States. The price of the product imported in January averaged 807 BRL per ton, FOB (Free on Board, origin), considering the average US dollar last month, at 4.15 BRL.

 

As regards Brazilian wheat exports, in January, shipments totaled 120.3 thousand tons, more than two-fold the amount exported in December/19, but almost three times less than that shipped in January/19. The number one destination for the Brazilian wheat in January was Vietnam, which imported 71.9% of all the volume exported, followed by the Philippines (28.1%).

 

(Cepea-Brazil)

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