Nearness of the harvesting presses down values in BR in late August, but monthly average rises

Cepea, September 2nd, 2021 – Despite the low wheat supply and high demand for wheat bran in the Brazilian market, wheat prices began to fade in late August. Pressure came from the nearness of the harvesting in Brazil – activities are expected to begin in September.


Thus, agents from mills opted for waiting for the new crop to arrive at the national spot market in order to resume closing deals for higher volumes. Besides, despite the recent frosts and water deficit at Brazilian wheat crops, production may be a record this season, which raises expectations for lower prices. The US dollar depreciation against the Real helped to press down wheat prices in Brazil too, since it makes the foreign product more attractive to buyers.


Despite the devaluations in late August, the monthly averages were higher than that in July. After the frosts in late July, currently, the lack of rainfall and the hot weather are concerning agents in the Brazilian wheat market. This scenario added to the increase in the import parity and high demand, majorly from the feed industry, kept wheat prices on the rise in Brazil most of the month.


CROPS – In Paraná, data from Seab/Deral show that production estimates for the state were revised down to 3.72 million tons, due to the drought and recent frosts. However, the output forecast for PR is still 17% higher than that in the previous season, which totaled 3.19 million tons. Until August 23, 58% of the wheat crops in Paraná were in good conditions; 30%, in average conditions; and 12%, in bad conditions.


In Rio Grande do Sul, according to data from Emater released on August 26, rainfall in the second fortnight of the month favored crops, but development is still slow in drier areas.


In Santa Catarina, according to data from Epagri/Cepea, wheat sowing ended in July. Crops, which are in the vegetative development stage, are in good conditions, but agents are concerned about low rains.


ESTIMATES – A report from Conab (Brazil’s National Company for Food Supply) released in August estimated the Brazilian area with wheat to reach 2.69 million hectares in 2021, 15.1% larger than that in the previous season. The average productivity of crops was revised down compared to that reported in July, but continued at record levels, estimated at 3.18 tons per hectare, 19.7% up from that last year. Thus, the Brazilian output may hit 8.59 million tons, a staggering 37.8% up from that in the previous season and a record.


Conab forecasts Brazil to import 6 million tons of wheat between August/21 and July/22, 0.12% less than that in the previous season (August/20 – July/21). Thus, the domestic availability (initial inventories + production + imports) may total 14.73 million tons, 14.5% up from that in the previous season and the highest volume since 2016.


As regards the demand for wheat, consumption is estimated at 12.34 million tons in Brazil, 3.7% up from that last season. Brazilian wheat exports are forecast at 600 thousand tons. In that context, ending stocks in June/22 are expected to total 1.79 million tons, a lot higher than the 146.9 thousand tons estimated in July/21.


The USDA released a report in mid-August estimating the Brazilian wheat production to total 7.7 million tons, 23.2% higher than that in the 2020/21 season.




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