Brazil covets US wheat, as Argentine supplies dive

(AgriMoney) – Brazil’s wheat imports from the US alone have topped 1.0m tonnes in two months, boosted by the need to replace supplies lost to frost, and with fears growing that neighbouring Argentina will again have little to export.

The US exported 121,500 tonnes of wheat to Brazil last week, taking the total for the first two months of 2013-14 to 1.05m tonnes, US Department of Agriculture data showed.

This compares with a mere 23,000 tonnes in June and July of last season.

And Brazil has already ordered a further 400,800 tonnes on top, including 169,500 tonnes logged last week.

Out of favour

While Brazil is a structural wheat importer, in contrast to its status as a major exporter of crops from corn to coffee, its needs have boosted this season by a frost last month, which hurt much of the crop in the southern state of Parana, typically responsible for about one-half of the domestic harvest.

However, while it has historically looked primarily to Argentina for supplies, Brazil is this time being forced to turn to North America by the growing unpopularity of wheat in its neighbouring country.

Argentine farmers last year planted their lowest wheat acreage in more than a century, discouraged by export restrictions which have often left prices well short of international ones, turning to barley instead.

Although sowings are expected to rise this year, after the government introduced a scheme to return to farmers takings on export taxes, wheat area is expected to remain historically low

‘Shortage of seed’

While the US Department of Agriculture, whose estimates set global benchmarks, has forecast Argentina farmers harvesting 4.2m hectares of wheat – still a historically low figure, and down, for example, on the 5.2m hectares two seasons ago – their staff in Buenos Aires pegged the figure at 3.9m hectares.

The Rosario Grains Exchange estimated Argentine wheat area at 3.8m hectares.

The USDA bureau said its figure reflected mistrust over the government tax redistribution system, and a two-year drought in the north west “which did not allow farmers to plant what they had originally intended”.

It also flagged a “shortage of good quality seed in the central part of the country”.

‘Merits attention’

The bureau estimated the Argentine harvest at 12.0m tonnes, 1.0m tonnes below the official USDA forecast, and exports in 2013-14 at 5.7m tonnes, 1.3m tonnes less than Washington has pencilled in.

In 2011-12, Argentine wheat exports, largely to Brazil, hit 12.9m tonnes.

At US broker Benson Quinn Commodities, Brian Henry flagged “continued talk of Brazilian interest in US hard wheat.

“The hard red winter wheat story merits attention, with millers in Brazil paying at or near record prices for supplies.

“I expect to see their current purchase programme continue,” although potentially at a “slightly slower pace” once a better assessment of freeze damage to the domestic crop has been gained.