Cepea, April 17, 2020 – Wheat prices have been on the rise in the Brazilian market since October last year, influenced by the strong US dollar, difficulties to import the product and, more recently, firm demand in Brazil. Thus, wheat growers may allocate a larger area to wheat crops this year (compared to that in 2019), expecting good remuneration. At the same time, agents from mills are trying to find alternatives to import wheat, aiming to offset the current low supply in Brazil.
According to data from Deral/Seab released on March 23, the new crop area should total 1.08 million hectares, 4.7% larger than that last season (2018/19). Productivity may grow by 32%, to 3.24 tons per hectare, resulting in an output of 3.4 million tons, a staggering 39% up compared to that last season.
Despite the possible larger area, Brazilian mills need to search for alternative sources of imports at lower costs, aiming to underpin the firm demand for wheat flour and other by-products. In this scenario, agents from mills have requested the exemption from the common external tariff to import wheat from Argentina during the coronavirus pandemic. If that is approved, this measure will allow Brazilian mills to purchase up to 750 thousand tons of wheat from out of Mercosur, with no tariff, according to information from the Brazilian Association of Wheat Industries (Abitrigo).
BRAZILIAN MARKET IN APRIL – Wheat prices remained firm in the Brazilian market in the first half of April, at 1,147.77 BRL per ton in Paraná State (PR) and at 993.54 BRL/ton in Rio Grande do Sul State (RS), a nominal record for the series, which started in 2004.
Prices were underpinned by the low wheat supply in the Brazilian market. As regards demand, it decreased slightly in the second week of the month. Thus, agents from mills continued to meet timely demands, having difficulties to pass on wheat price rises to wheat flour.
IMPORTS AND EXPORTS – With the low wheat supply in Brazil, imports increased in March, despite the strong dollar. According to data from Secex, purchases from the international market totaled 659.8 thousand tons last month, 2.4% up compared to that in February. The wheat imported came primarily from Argentina. Brazilian wheat exports totaled 64.9 thousand tons in March, 39.2% down compared to that in February. The main destination for the Brazilian product last month was Vietnam.
WORLD – According to data from the USDA, the world wheat production in 2019/2020 may be higher than the record hit in the previous season. The European Union and other top wheat-producing countries, such as China, India, Russia and the United States, have increased production in order to meet the growing global demand. Moreover, the harvesting of winter crops in countries from the Northern Hemisphere should start in the coming months.