Paraguay Wheat: $500 Cost per Ha, $200 for Fertilizer


Nov 15, 2022 | Agricultural Markets News

Reading time: 2 minute

Wheat is generally planted in the southeastern part of Paraguay, concentrated primarily in Itapúa and center-south of Alto Parana. Wheat production in the country is considered to be risky due to frosts and sometimes excessive rainfall. Still, certain farmers are very committed to wheat production because the wheat harvest provides farmers with a source of funds shortly before the soybean planting season, which requires a significant investment.

Wheat Production in marketing year (MY) 2022/2023 is forecast at 1 million metric tons (MMT), higher than the previous crop season and similar to MY 2020/2021. The area is expected to remain unchanged at 450,000 hectares despite projected positive margins due to high world wheat prices, which should be a stimulus for planting more area. One constraint is wheat’s planting window in Paraguay. It can follow the second crop, soybeans, but not the second corn crop, which requires more time before harvest.

The severe drought that affected the main soybean crop in MY 2021/2022 constrained the availability of seed to plant the second soybean crop, which is usually harvested in April-May, just in time to plant wheat. This situation forced many farmers to grow a more significant zafrinha acreage of corn which is generally harvested later in June/July after the wheat planting window is over.

Local wheat prices in late March 2022 were roughly $355 per metric ton at the mill, but farmers are concerned that future prices may decline. Paraguayan wheat producers do not have good options to hedge their wheat production. They are generally reluctant to forward sell a large percentage of their expected output because of the financial risk of signing such contracts when faced with the possibility of a poor harvest.

Current direct costs for a hectare of wheat in Paraguay in MY 2022/2023 are estimated at $500, of which $200 is fertilizer. Productivity in MY 2021/2022 was hurt due to solid frosts. Yields were somewhat lower than usual but resulted in good-quality wheat. However, there were 50,000-70,000 tons of poor-quality wheat rejected by millers and purchased at fair prices by the animal feed industry due to a shortage of corn in the market.

In MY 2022/2023, Paraguayan wheat exports are forecast at 280,000 tons, with practically all exports going to Brazil. Wheat is exported by truck, primarily to the Brazilian State of Parana, which borders Paraguay and hosts the largest concentration of flour mills in Brazil. These mills mix Paraguayan wheat with local wheat to improve the quality of the flour, as it usually has higher protein and better gluten quality.

Paraguayan Wheat Consumption

The total domestic wheat consumption in MY 2022/2023 is forecast at 720,000 MT, in line with consumption figures for the previous two years. More than thirty flour mills with a processing capacity of 1.2 million metric tons of wheat generally use about 600,000 tons a year. Roughly 15 percent of the flour sold domestically is in 1 and 5-kilogram bags intended for retail sale, and the rest is distributed in 25 and 50-kilogram bags to bakers and pasta manufacturers.

The most important center of flour milling in Paraguay is near Doctor Juan Eulogio Estigarribia, in the center of the country’s eastern region. Flour mills owned by members of the Mennonite community in Paraguay account for approximately 60 percent of the nation’s production. Some 50,000 tons of wheat is consumed to produce flour for export.

While Paraguayan wheat and flour are generally prized for their relatively high quality in the region, some poorer quality wheat that doesn’t meet domestic standards is normally exported or used for animal feed. Industry contacts report that average ending stocks range between 100,000 to 150,000 MT in August before the harvest of the new crop.

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