A lack of wheat crop in Argentina due to adverse weather conditions such as drought and frost will cause Brazil to seek larger volumes of grain from alternative sources, such as the United States, Canada and Russia, to meet the needs of them, market experts estimated.
In the latest trading year (2021/22, August/July), Brazil imported only about 155,000 tonnes from non-Mercosur countries after buying almost 900,000 tonnes from the US, Canada and Russia in the previous year, according to data from the Brazilian government .
In 2022/23, due to the weather problem in Argentina and excessive rains that reduced the quality of the essential Brazilian producer Paraná, the country will buy outside South America at least 1 million tons, according to analysts.
“Usually, Brazil pulls about 6 million tonnes from Argentina, but it’s unlikely we’ll get it all there this year, so I’d say we have a gap of 1 million to 1.5 million tonnes that could come out Thanks,” said StoneX risk. management consultant Fabio Lima, wheat specialist.
Between August 2021 and July 2022, Brazil imported 5.5 million tons of wheat from Argentina, accounting for most of the country’s imports, one of the largest global buyers, which has over 12 million tons annually.
He recalled that Mercosur’s common external tariff (TEC) is zero for imports of some products this year, including wheat, and that Brazil also has an annual quota of 750,000 tons exempt from the 10% TEC for purchases from outside the trading bloc. and must use it in 2023.
Lima said it is difficult to estimate when wheat from outside Mercosur might start arriving.
But he said he had received information – not immediately confirmed – about the recent arrival of a Russian shipment. He did not have details of the port of landing or the volume.
With Argentina’s crop deteriorating, whose output estimate was cut this week to 13.7 million tonnes, the lowest volume since 2015/16, according to the Rosario Stock Exchange, millers are certain to pay more for a product from Mercosur or outside the bloc.
“Since the Argentinians are selling a significant portion, I think it’s very likely that we will have to look for wheat in alternative destinations, first in the United States, but also potentially in Canada and Russia,” Carlos Cogo said. , from Cogo. Agribusiness Intelligence.
“Now importing means paying dearly, even considering the exemption from import taxes, exemption from any tariff… the ruler is very high. It is expensive, which means a bullish scenario in the medium to long term.”
He cited quotes on the Chicago Stock Exchange supported by uncertainties over Ukrainian wheat exports through the Black Sea Corridor, bad European harvests and US climate concerns.
According to Cogo, Argentinians have already sold almost 9 million tons of the 2022/23 crop, the harvest of which begins to gain momentum in the coming weeks. “In other words, there is practically not much left for Argentina.”
With lower-than-anticipated supply, Argentine wheat has risen in the past month from $320 a ton to $380 a ton (up river port region basis), StoneX’s Lima pointed out.
Exports from Brazil
Argentina’s smaller crop and higher prices should provide some competition for Brazil’s wheat on the international market, said an industry insider, requesting anonymity to speak freely.
Although the country is an important importer, it also exports non-negligible volumes, especially cereals with characteristics not suitable for bread flour, which constitutes the largest Brazilian demand.
Despite weather problems in Parana, Brazil should harvest a record crop of more than 9 million tonnes after producers expanded 10% of planted area with the help of reasonable prices, which favors exports.
“Brazil already has export commitments of 1 million tons,” the source said, noting that the market is waiting for greater clarity on the quality of the rain-affected Parana crop to close more deals.
From January to September, the country exported a record 2.5 million tons of grain.
