Brazilian flour millers will retain the taste for
US wheat which has been a big prop for Chicago prices, snubbing
Argentina because it has become a "problematic supplier".
Brazil – which while a major exporter of the likes of
coffee, corn and soybeans is a structural wheat importer – will buy-in 7.3m
tonnes of the grain in 2014-15, a figure in line with historical rates,
according to the US Department of Agriculture bureau in Brasilia.
While Brazil's wheat consumption will tick higher to a fresh
record of 11.6m tonnes, lifted in particular by growth in crackers and
biscuits, production will be supported by improved seed varieties, attuned to
local conditions such as harvest rains and high aluminium content in soils.
Although wheat imports from the US will not quite match
recent highs (they hit a 30-year top of 3.48m tonnes in calendar 2013) they
will remain elevated, as millers lose faith in their historically favoured
origin of Argentina – at least, according to USDA staff.
Argentina has slumped as a force in world wheat exports,
with annual shipments in the five years to 2012-13 averaging some 7.6m tonnes,
down 28% on those in the previous five years, with farmers blaming political
interference in exports for a declining willingness to grow the crop.
Exports this season are expected at 3.0m tonnes, the lowest
in 36 years, a factor which prompted buyers in neighbouring Brazil to seek
alternative origins, notably the US.
"Despite record global production, Argentina, which traditionally
supplied most of Brazil's wheat import demand, had the worst crop in a century,"
the USDA bureau said.
Brazilian millers told a USDA tour that "they would continue
to buy US wheat, since Argentina is a problematic supplier due to its current
economic problems and government intervention in the wheat sector".
The switch to the US may be supported by a repeat of
Brazil's temporary removal, from April to December last year, of a 10% tariff
on purchases from outside South America's Mercosur trade zone.
"It is possible that Brazil will reduce the [tariff] again
in April to fill demand for wheat and keep prices stable during 2014, as it is
a presidential election year," the bureau said.
Still, it estimated that "Brazil will import 3m tonnes of US
wheat with or without the [tariff] reduction".
"Brazilian millers will continue to purchase North American
wheat for its quality and reliability," the bureau said, while acknowledging
that US wheat delivered to the US port of Santo cost, at $395 a tonne, $30 a
tonne more than Argentine supplies, costs and duties included.
Brazil was in 2013 the second largest importer of US wheat,
The comments came in a report in which the bureau also
pegged Brazil's 2013-14 corn production at 72.0m tonnes, 2.0m tonnes higher
than the official USDA estimate, although it failed to outline the reasoning
behind its forecast.
Brazil corn output in 2014-15 will ease to 71.0m tonnes.