Brazil: Fertilizers Make Up 35% of the Total Wheat Cost
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As Brazilian farmers continue to invest in technology, including in new Wheat cultivars that allow weather resistance and higher grain productivity, Post forecasts Wheat production for MY 2023/24 at 11 MMT, up 3.8 percent on the current season estimate, with a yield forecast of 3.2 metric tons per hectare (MT/ha). The new estimate represents a 2.4 percent decrease in the productivity estimated for the 2022/23 harvest only because the past season experience above-average yield results. Wheat continues to bring in solid investments, as the Brazilian government sees this grain as the next big commodity for Brazil to target in its path to self-sufficiency, following the boom in the production of soy and corn.
In Wheat, production costs are usually associated with inputs (fertilizers, pesticides, and seeds) and operations in the field (fuel and tractors). The prices of fertilizers and pesticides remain the most significant contributor to the cost of Wheat production. According to the National Supply Company (CONAB), in January 2023, these two inputs were responsible for half of the variable costs of Wheat production in Londrina, a city in Paraná. In Brazil, many inputs, such as machinery and seeds, are imported, so their prices will vary with the volatility of the domestic currency (the ‘real’ – R$) and the government’s economic measures.
Wheat was traded in Rio Grande do Sul at R$ 1262.1 (US$ 264.15) per ton on June 22nd, 2023, according to the University of Sao Paulo’s Center for Advanced Studies in Applied Economics (CEPEA). This is 3.5 percent lower than a month before when the commodity was negotiated at R$ 1308.55 (US$ 263.34). In Paraná, the drop was similar, with Wheat being sold at R$ 1369.59 (US$ 286.65) per ton on June 22nd, 2023, and R$ 1416.11 (US$ 284.99) a month prior. The drop is credited to slow demand for Wheat, as traders have their eyes set on harvesting the next crop.
Wheat Trade in Brazil
Post lowers its forecast for Wheat export for MY 2023/24 (October 2023 – September 2024) to 3.4 MMT, from its previous estimate of 4 MMT, on a Wheat grain equivalent basis (WGE), based on readjusted expectations trends for 2022/23 and 2023/24, following increased production outputs concerning the previous forecast. Note that USDA uses WGE for trade numbers, which in addition to Wheat grain, include flour and Wheat product volumes adjusted on a Wheat grain equivalent basis.
Post slightly increases its Wheat imports forecast for MY 2023/24 from 5.5 MMT to 5.6 MMT on a Wheat grain equivalent basis (WGE), based on an ongoing increase in consumption and the easiness of trade with Mercosur partners. Given the tax-free price and proximity for millers, Argentina remains the primary source of Brazilian purchases. While Brazilian production is expected to continue growing, it will likely not be enough to meet the internal demand for the upcoming year.
Argentina remains the biggest Wheat exporter to the Brazilian market, responsible for almost 69 percent of all Wheat imports between January and May 2023. Uruguay provided 20 percent of the Wheat, followed by Russia (9%) and Paraguay (3%). According to AgFlow data, Brazil imported 0.26 million tons of Wheat from Argentina in July 2023, followed by Russia (0.17 million tons), the US (0.13 million tons), and Uruguay (79,772 tons). Total imports hit 0.75 million tons in July 2023.
Wheat Milling in Brazil
Data from the Brazilian Association of the Wheat Industry (ABITRIGO) show that in Brazil, 12.56 million tons of Wheat were milled throughout 144 industrial plants in the country. Of this amount, approximately 8.5 million tons resulted in flour for commercial use. The main sectors that received the Wheat flour produced were bakery and premixes (42.6% of the total), the pasta industry (12.5%), and the biscuit industry (10%).
Other sources: USDA
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