South America Calling

U.S. Wheat Shipments To Brazil To Fall In 2015

Brazil will import much less U.S. wheat in 2015 due to a bumper harvest at home and the expectation of a large crop in Argentina, an industry head said Tuesday.

"We won't depend on U.S. wheat next year and there will probably be no repeat of the lifting of the TEC (import tax)," Sergio Amaral, president of the Brazilian Wheat Industry Association (Abitrigo), told a press conference.

Brazil, one of the world's biggest importers of wheat, normally depends on Argentina to meet the considerable shortfall in its supply. But the unreliability of Argentine supply has led Brazilian millers to turn to U.S. wheat over the past two years.

In 2013, around half of Brazil's imports of 6.6 million metric tons came from the U.S. and, in the first nine months of 2014, the U.S. accounted for approximately 2 mmt of Brazil's total imports of 4.6 mmt, according to government trade figures.

Brazil was forced to import more than expected in 2013-14 after frost devastated crops in Parana, the No. 1 producing state, last year.

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But with the 2014-15 harvest now approximately a third complete, Brazil is on course to produce a record crop of 7.7 million metric tons, up 39% on the year before, according to the Agriculture Ministry.

Meanwhile, Argentina is set to plant a larger crop, which will allow for exports to triple to 6 mmt in 2014-15, according to the U.S. Department of Agriculture.

In addition, Urugay and Paraguay will likely supply Brazil with another 1 mmt of wheat each.

That is why there will probably be no need for the Brazilian government to lower the Mercosur's wheat import tariff in 2015, said Amaral.

The 10% tariff on wheat imported from outside the Mercosur trade bloc, which includes Brazil, Argentina, Uruguay, Paraguay and Venezuela, was suspended on two occasions in 2014, leading to the importation of 1.5 mmt of U.S. wheat tax free.

Some U.S. wheat may be imported in 2015, with the tax paid, as it is expensive to send wheat produced in southern Brazil to the northeast of the country but nothing on the level seen in the previous two years.

Wheat harvesting is 60% complete in Parana with farmers reporting high yields and good quality.

In Rio Grande do Sul, the No. 2 producing state, harvesting is a couple of weeks away. The crop looks good there too but farmers are worried that heavy rains over the last few weeks may affect quality.

Quality, more specifically the inability to produce wheats with high gluten strength, is one of the sector's big issues.

Last year, only 5% of the crop had high-enough gluten strength for bread production, according to Luiz Carlos Caetano, Abitrigo's technical director. This year, that figure was set to rise to 15% to 20% before the recent rains.

The government has committed to stock or subsidize the sale of 1.7 mmt of wheat this season to offset the impact on farmers of the bumper crop and the decline in international prices. A total of R$350 million ($146 million) has been set aside and the first subsidy auction took place last month.

(CZ)

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