Oct 26, 2017

Brazilian Minister requests Wheat Imports from Outside Mercosul

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazilian farmers are once again disappointed with their winter wheat production. This marks four out of the last five years that the wheat crop in southern Brazil has failed to meet expectations. As a result, Reuters is reporting that the Brazilian Minister of Agriculture, Blairo Maggi, is requesting that 750,000 tons of wheat be imported from outside of Mercosul countries and that it be exempt of the 10% import duty imposed on imports from outside the block.

Brazil cannot produce enough wheat to meet its domestic demand and as a result, it is one of the world's largest importers of high quality wheat. Even though the request does not specify the origin of the imports, they would most likely come from the United States or Canada with the possibility that some might come from Russia.

In its most recent monthly report, Conab estimated that Brazil's 2017 wheat production would be 4.88 million tons, which would be down 27% from the 6.7 million tons produced in 2016. Brazilian farmers reduced their wheat acreage in 2017 by 10% due to low prices and now adverse weather is reducing the Brazilian production even more.

In their latest monthly report, Conab estimated that Brazil would import 7 million tons of wheat in 2017, but that estimate may now be too low given the deteriorating condition of the Brazilian wheat crop. The domestic demand for wheat in Brazil is estimated at 11 million tons.

The entire wheat growing season in Brazil has been one problem after another. The weather in June and July was very dry which negatively impacted the germination and plant populations. A series of frosts resulted in additional damage to the crop especially in the state of Parana. Currently, heavy rains, high winds, and hail have resulted in additional damage especially in the state of Rio Grande do Sul where the wheat harvest is just getting underway. The wheat harvest in Parana is approaching three-quarters complete.

In both states, farmers have been very disappointed with the yields and the quality of the grain. Much of the wheat in Rio Grande do Sul may be of such poor quality that it would only be suitable for animal feed. Normally, Brazil is able to import enough wheat from Argentina, Paraguay, and Uruguay to meet its domestic need, but the wheat crops in the neighboring countries has also been disappointing for many of the same reasons.