Brazil's wheat crop may upend early expectations and reach a record output this year, contributing to lower imports needs for the country, even amid constant demand from local mills.
Acreage has expanded in all main grower states, totaling 2.3mn ha, and general weather conditions have been good for crop development, a stark contrast to the drought the winter corn (safrinha) faced in past months. The wheat harvest is expected to start next month and continue through the rest of 2020.
In the southern state of Parana, Brazil's top wheat producer, expectations are for a "full harvest" this year, the local Department of Rural Economics (Deral-PR) said. Last week, 90pc of Parana's crops were classified as "good", compared to 63pc by this time last year.
Despite lack of rainfall in some regions, Deral-PR forecasts a 3.6mn t output in Parana, 72pc higher over the prior cycle, while country's agricultural statistics agency Conab sees 3mn t for the state, up by 41pc.
Production increases of 13pc and 11pc are also anticipated for the Rio Grande do Sul and Sao Paulo, respectively, according to Conab. Both states follow Parana as the second and third largest producers of wheat.
The current scenario has been leading market participants to consider a national harvest higher than the 6.3mn t currently estimated by Conab — last season Brazil produced around 5mn t amid crop failure in Parana.
Specialized consultancy T&F Agroeconomica, for example, says Brazil's potential is for a 7.3mn t record crop, surpassing the prior record of 6.7mn t in 2016. It considers not only higher acreage and good development but also a harvest without weather-related impacts, such as excessive rains that could hamper field activities and reduce cereal's quality.
If so, Brazil would be better positioned in terms of wheat imports next year, after the 2020's harvest. The country is expected to buy from abroad 7.3mn t of the cereal this year, given lower output in 2019 and firm consumption from industries. But such a necessity might fall to as much as 5.5mn t in 2021, T&F Agroeconomica predicts.
Brazil is a heavy importer of wheat and has Argentina as its main supplier, thanks to customs attractiveness from the Mercosur trade bloc. The neighbor country accounts for around 80pc of all the Brazilian wheat purchases in the international market.
Brazil's wheat import necessity might fall even amid firm demand from local mills. In 2019, the cereal crushing reached 12.4mn t, up by 2pc over 2018, according to the Brazilian wheat industry association Abitrigo. That compares to 11.8mn t in 2017.
Even amid economical turbulence caused by the Covid-19 pandemic, Abitrigo has forecast that wheat crushing in 2020 might repeat last year's volume.
