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June 2, 2016

Producers in Parana to Reduce 2016 Wheat Acreage by 15%

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The state of Parana is the largest wheat producing state in Brazil and farmers in the state are expected to reduce their wheat acreage by 15% during the 2016 growing season. According to the Secretary of Agriculture for the State of Parana, farmers are reducing their wheat acreage for two main reasons. The first reason is due to the increased cost of production especially for fertilizers. The second reason is due to a lack of credit for production loans and a general lack of crop insurance.

The crop insurance issue is important for farmers because they have experienced two years in a row of disappointing wheat crops. Heavy rains at harvest time have resulted in lower yields and poor quality seed. Much of the wheat produced during the last two growing seasons could not be sold for milling and was sold for animal feed at lower prices. Brazilian farmers have long complained about the lack of crop insurance programs that would cover their costs in the event of adverse weather such as they have experienced for two years in a row.

Wheat prices in Parana are actually higher this year, but even with the higher prices, farmers are not enthusiastic about planting wheat. The current price for wheat in the state is approximately R$ 42 per sack (approximately $5.45 per bushel) compared to last year when it was R$ 35 per sack (approximately $4.50 per bushel). But even with the increase, production costs are much higher especially for fertilizers and farmers are having trouble getting credit and crop insurance.

Rio Grande do Sul is the second largest wheat producer and the wheat acreage in that state is also expected to decline 13% this year according to Emater. Even with the reduced acreage, the wheat production in the state could be larger than last year due to improved weather. During years when a La Nina is present, wheat yields in the state are generally favorable.

Brazil generally produces about half of the wheat they need for domestic consumption and they generally import the remainder of their wheat needs from Argentina.