(Agrimoney) – The Brazilian wheat market has “practically stopped” in some areas, officials said as buyers, faced with a poor quality domestic crop, hold out for supplies from neighbouring Argentina.
The official Conab crop bureau – in a report which nudged higher the forecast for the Brazilian corn crop, but trimmed estimates for soybeans and wheat output – said that mills in the top producing state of Parana were “not buying [wheat] grain.
“The wheat market has practically stopped.”
In Rio Grande do Sul, the second biggest wheat producing state, buyers are “returning supplies already received” over claims the quality has not met expectations.
Volume drop
The comments come at the end of a harvest which Conab downgraded again for quantity – this time by nearly 100,000 tonnes to 5.53m tonnes, a decline of 7.3% year on year.
The revision reflected a small drop, to 2.26 tonnes per hectare from 2.30 tonnes per hectare, in the average yield estimate.
However, the bureau also highlighted shortfalls in the quality of the domestic harvest, hurt by excessive rains both in July and around the harvest period, which lasts from August to December in the main southern producing region.
‘No commercial value’
In Parana, the bureau noted wheat while, boasting a good reading on specific weight, came in short on its Hagberg falling number “preventing its use in bread production”.
The falling number is a measure of the sprouting which is encouraged when rain falls on ripe wheat, lowering its milling specifications.
In Rio Grande do Sul, supplies were falling short on falling number, specific weight and levels of the key protein gluten.
In Santa Catarina, some crop is not being harvested because it had “already deteriorated to the point of not having commercial value”, the bureau said.
“Events such as late frosts, gale and hail contributed to lower grain yields and quality,” Conab said, adding that most of the state’s harvested wheat was destined for feed, coming in short on specific weight.
Awaiting Argentine supplies
The shortfall in quality has left many Brazilian mills awaiting wheat imports from neighbouring Argentina, the southern hemisphere’s second-ranked exporter of the grain, after Australia, and whose trade prospects have been enhanced by reforms introduced by its new government.
The administration of Mauricio Macri has, since taking charge a month ago, ditched wheat export taxes and quotas, and liberalised the peso, which has tumbled some 40% against the dollar, so boosting the competitiveness of the country’s exports.
Argentine wheat accounted for 77% of Brazil’s 4.7m tonnes of imports of the grain in the first 11 months of 2015, Conab said.
However, there is talk that Argentina’s harvest, which is in its closing stages, has suffered its own quality setbacks, thanks also to heavy rains in some regions at harvest time.
Traders at a major European trading house, for instance, cautioned that Argentine wheat “may be excluded from some South East Asian markets because of high DON [vomitoxin] levels”.
‘Problems caused by lack of rain’
Conab’s comments came as the bureau also trimmed its estimate for Brazilian soybean production for the newly-started harvest, by 350,000 tonnes to 102.1m tonnes, although this would still be comfortably a record high, beating last year’s high by 6.1%.
The downgrade reflected a cut of nearly 800,000 tonnes, to 28.27m tonnes in the estimate for output in the top producing state of Mato Grosso, thanks to “problems caused by the lack of rain”, which has forced many growers to replant crops.
In the centre-north of the state, “many municipalities are struggling with a severe shortage of rain”.
However, production figures for states such as Bahia in the north and Parana were upgraded, reflecting increased sowings estimates.
For corn, Conab upgraded its forecast for Brazil’s first crop by 265,000 tonnes to 27.76m tonnes, reflecting increased yield expectations for states including Bahia, Rio Grande do Sul and the top producer Minas Gerais.
