Wheat prices in Brazil hit a two-year high – contrasting with soft values on international markets – as the scramble by livestock producers for feed crops, amid a squeeze on corn supplies, and even as flour mills battle for supplies of higher-quality grain.
Wheat prices in Parana, Brazil’s top wheat-producing state, hit R$824.59 a tonne on Tuesday, the highest since May 2014, according to research institute Cepea.
Parana prices are now up 13.2% so far this year in real terms, and by 25% in dollar terms, factoring in the recovery in Brazil’s currency this year.
In second-ranked producer Rio Grande do Sul – where prices hit R$767.03 a tonne, the highest since October 2013 – values are now up 18.0% this year, or 31% in dollar terms.
Just this month, prices are up by 7.7% in Parana and 11.7% in Rio Grande do Sul, increases “driven by higher demand from the animal feed industry”, Cepea said.
Dollar-denominated futures in Chicago, meanwhile, the global benchmark market, have eased by 0.8% so far this year, amid ideas of ample world supplies.
‘Worst in five years’
The institute flagged the knock-on effect of “high prices” of corn, whose appreciation of 44% so far this year, in Brazilian terms, has been better documented, and reflects a drain on inventories from a strong export programme last year and the prospect of a disappointing safrinha (second crop) harvest.
Indeed, in Mato Grosso, yields are “expected to be the worst in five years”, hurt by unduly dry weather, US broker Benson Quinn Commodities said, flagging early harvest results of 83.8 bushels per acre.
“The forecasted [Mato Grosso] production is 23.1m tonnes and it’s likely to move even lower.”
The broker added that “Goias has been the hardest hit [state] where yields are coming in at 14-18 bushels per acre – typical yield 100-110 bushels per acre”.
Flour mill shortage
Wheat prices have also received a pull from the repercussions of, another, poor-quality harvest last year, which has forced mills to scramble for supplies capable of turning into flour.
Rio Grande do Sul, typically a net wheat exporting state, is expected to import some 500,000 tonnes of the grain from Argentina, Paraguay and Uruguay to ensure a grist for its flour mills, a rise of 40% year on year, according to industry group Sindtrigo-RS.
“A lack of high quality wheat in Rio Grande do Sul is forcing millers to import additional wheat,” analyst Michael Cordonnier said, highlighting that for two successive years “excessively wet conditions in the state during harvest has resulted in low yields and poor quality wheat”.
(Source – http://www.agrimoney.com/news/brazil-wheat-prices-hit-two-year-high-amid-scramble-for-feed–9586.html)