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May 25, 2016

Brazil importing more Wheat to keep the Mills Running

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

A lack of high quality wheat in Rio Grande do Sul is forcing millers to import additional wheat into the state. Generally, the state of Rio Grande do Sul is a net exporter of wheat to other states in Brazil, but the Syndicate of Wheat Industries in Rio Grande do Sul (Sindtrigo-RS) indicated that the state will need to import 500,000 tons of wheat from Argentina, Uruguay, and Paraguay to keep the mills running, which is 40% more than what they imported last year. This makes two years in a row that excessively wet conditions in the state during harvest has resulted in low yields and poor quality wheat.

Generally, the flower mills in Rio Grande do Sul send 35% to 40% of their flower production to other Brazilian states, but they are losing their competitive advantage this year to neighboring Parana because the higher price of the imported wheat. The imported wheat generally costs 10% to 15% more compared to high quality wheat produced within the state.

It is estimated that the flower mills in the state will produce 1.6 million tons of flower or 7% less than last year. The worst economic crisis in decades has resulted in massive unemployment and reduced consumer demand for wheat flower and its byproducts. The Organization of Cooperatives in the State of Parana (Ocepar) is estimating that after two years of declining flower production, there will be 10 million tons of wheat milled nationwide in 2016, which is unchanged from last year.