May 04, 2018

Brazilian Millers may need to Import U.S. Wheat

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

Wheat millers in Brazil usually have to import higher quality wheat to meet the domestic demand and they generally import the majority of the wheat from neighboring Argentina. The weather in Argentina has been very erratic this year and now there are concerns that there may not be any more wheat available from Argentina than what has already been committed until the end of the year. If that turns out to be the case, it could open the door for wheat imports from the United States.

According to an analysts from the consulting firm Consultoria Trigo & Farinhas and reported in Agrolink, the Argentine Minister of Agriculture has indicated on its web site that there will only be 5.3 million tons of wheat left to sell in the country after the 17.5 million tons of exports are accounted for.

The next wheat crop in Argentina will be harvested in December and between now and then, Argentina will mill approximately 500,000 tons of wheat per month and they will sell to exporters approximately 500,000 tons per month. In other words, Argentina would need 8.0 million tons of wheat to satisfy both millers and exporters until the new crop is available at the end of the year, but there is only approximately 5 million tons available.

That is why Brazilian millers who have not yet purchased their needed supplies for later in the year are very nervous that they may not be able to purchase wheat from Argentina until December. To fill the potential void, some millers are already contemplating purchasing U.S. wheat now for delivery starting in September.

How much they may need to purchase will depend in part how many hectares of wheat are planted in both Brazil and Argentina. Brazilian farmers are expected to increase their wheat acreage in 2018 and the hope is that the production will be 5 million tons or more, which would still be less than half of the domestic demand.

The problem with wheat production in Brazil is not limited to acreage. The quality of the Brazilian wheat is often times problematic due to excessive wetness during harvest in November and December. In many years, a significant porting of Brazil's wheat is only feed quality wheat which forces millers to import higher quality wheat from Argentina or other countries. The earliest any new crop wheat would be available in Brazil is mid-September.

Wheat planting in Argentina generally starts in May and finishes in June. The initial concern was that the severe drought that has impacted the summer crops in Argentina would prevent farmers from planting all their intended wheat acreage due to dry conditions. That concern has been turned 180 ° and the concern now is that they may not plant all their intended wheat acreage due to excess wetness and flooding.

Starting in April, rains returned to the humid pampas regions of Argentina with areas of Buenos Aires province receiving 4-10 inches during April, which resulted in flooding. The forecast is now calling for more heavy rains in generally the same areas which if verified, could result in delayed corn and soybean harvesting and subsequently delays in planting the winter wheat.