Brazilian officials ditched expectations of a tumble in
wheat imports to a multi-year low after a surprisingly strong finish to 2016
for buy-ins, encouraged by a recovery in the real and state purchases of domestic
Conab - which a month ago slashed its forecast for Brazil's wheat
imports in 2016-17 [on an August-to-July basis] to 5.10m tonnes, the lowest since
at least the mid-1990s – on Tuesday revised its forecast sharply upwards, to
That would represent a rise of more than 440,000 tonnes year
on year, and indeed mark the highest imports in three years by Brazil which,
while an exporter of the likes of coffee, sugar and soybeans, is a structural
purchaser of wheat, largely of higher quality milling varieties.
The revision came despite a small upgrade, of 30,000 tonnes to
a record 6.73m tonnes, in Conab's estimate for the newly-finished domestic
Instead, Conab said its higher import forecast reflected unexpectedly
strong wheat volumes brought in late last year, helping drive total purchases
for calendar 2016 to 6.87m tonnes, a jump of 33% year on year.
"It is worth noting the volume of wheat imported in December
of 713,700 tonnes, against 464,400 tonnes in the same month of the previous
year," Conab said.
The bureau highlighted that this had come at "the time when
the government intervened" in the domestic market through programmes which include
a so-called PGPM scheme aimed at offering a minimum price set at R$38.65 per 60
kilogramme bag, or R$644.17 per tonne, in the southern wheat belt.
One of the aims of Brazil's wheat subsidy regime is to facilitate movement of wheat from major growing states, such as Parana and Rio Grande do Sul, in the south to demand centres further north.
Although wheat values did fall below the government's minimum level - averaging some R$622
per tonne in December in the southern, main producing state Parana, according to data from
research institute Cepea - that price, equivalent to more than $185 per tonne, topped
some offers from exporting countries.
Signally, Argentina, Brazil's default origin for wheat,
offered the grain to Egypt as low as $173.00 a tonne excluding freight just
The wheat landed in December in Brazilian ports - in many cases, nearer to demand centres than Parana - cost an
average of $185.37 per tonne, according to the country's commerce ministry.
Conab flagged that Brazil had imported 1.67m tonnes of
Argentine wheat in the August-to-December period, along with 1.0m tonnes of US
And it highlighted that Argentina, which as a fellow member
of Mercosur exports wheat to Brazil duty free, remained a key source of the
"The supply of wheat in Mercosur will be broad, with
production in Argentina expected to grow to 14.4m tonnes, supplying the market
with good quality wheat," Conab said.
"With this, Argentina will have a surplus of 8m tonnes,
requiring the continuity of a good export performance, as has already been
Rebuild in state
Conab foresaw potential for some of Brazil's strong wheat
supplies to end up in livestock rations, saying that a "portion of" the
surplus, with lower specification, may replace corn in feed.
However, it also hiked by nearly 900,000 tonnes, to 2.07m
tonnes, its forecast for Brazilian wheat inventories at the close of 2016-17, including
potential growth in state stockpiles.
The government was in talks over buying "part of this
surplus production, to rebuild public stocks, which are practically
non-existent", the bureau said.