the past, Brazil has followed a self-sufficiency policy for wheat but with only
limited success and at considerable cost. However,
the government continues to focus on expanding production into non-traditional
growing areas and the total area planted to wheat is up, largely due to higher
support prices. Nevertheless, production meets only about a third of the
countryís consumption needs. Therefore,
Brazil has been among the top three global wheat importers over the past decade. Argentina is the main supplier to this massive market because
of an obvious freight advantage combined with a preferential tariff rate as a
Mercosul member. In fact, it has
supplied 95 percent of Brazilís import needs over the past 3 years with only
small amounts shipped by the United States and Canada.
Typically, Argentine exports slow and prices rise from June
to November as supplies
tighten prior to harvest. However,
this year Argentine prices have soared to unusually high levels reflecting tight
old crop supplies and concerns over future supplies with the 2002/03 wheat crop
forecast smaller than last year. Planted
area will likely be down as a result of the high cost of inputs, tight credit,
and economic uncertainty. Exacerbating
the problem is the fact that Argentine farmers are retaining wheat as a form of
currency. Therefore, Brazilian
millers, which need to import over the next few months before their local
harvest, have been forced to look elsewhere for supplies.
Millers are requesting that the 11.5 percent Common External Tariff (CET)
placed on non-Mercosul wheat be removed. Though
the CET was recently removed in Uruguay, it is unlikely to occur in Brazil,
given resistance from domestic producers.
For several years, Brazil
restricted U.S. wheat imports due to several phytosanitary issues.
However, in October of 2000, Brazil lifted most of its long-standing
restrictions, but imports from the U.S. did not rise as many had anticipated.
U.S. exports to Brazil in 2000/01 and 2001/02 combined were less than
120,000 tons. Nevertheless, the United States appears to be the main beneficiary of Brazilian needs
this year with sales reaching 430,000 tons as of August 1, including nearly
350,000 of Hard Red Winter and 85,000 of Soft Red Winter. Meanwhile, small
amounts of Canadian wheat have been purchased as well as some from
non-traditional sources. Purchases from Poland, estimated at 120,000 tons, are
particularly surprising given Brazilian phytosanitary restrictions, which
apparently have been eased to accommodate the urgent need for wheat.
In addition, Ukraine is reported to have exported to Brazil for the first
time ever. A shipment of 35,000
tons is reported with speculation of 100,000 tons more in sales.
There are also rumors that Russian and French wheat may be imported in
the near future. This leads to an
interesting situation in which the United States, Canada, and new suppliers will
be battling over the next few months for a Brazilian market typically dominated
For more information, contact: Oliver Flake, 202-690-4200
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