Brazil may be poised to ditch a tariff on wheat imports following damage caused to the domestic crop by record rains in its major producing region.

The country, one of the world's biggest grain importers, is believed to be considering the removal of a 10% levy on imports from outside South America's Mercosul trade area.

The speculation, which comes only two months after Brazil's farm ministry lobbied for the tariff to be raised to 35%, follows a poor harvest in the key grain state of Parana, where production is estimated at 2.8m tonnes, 20% below initial forecasts.

Brazil's wheat shortfall is estimated at nearly 7m tonnes for 2009-10, compared with 4.7m tonnes the year before, according to US estimates.

While Sao Paolo has historically filled the gap by importing wheat from Argentina, a persistent drought, and a dash to grow more-profitable soybeans, have slashed available supplies in the Brazil's southern neighbour.

Export winners 

"There is renewed speculation that the government of Brazil may consider temporarily lifting the common external tariff," a report from US officials in Sao Paolo said.

Imports from outside Mercosul, which are typically a trickle, would jump to 2m-3m tonnes, presenting an opportunity to North American producers.

"Given an estimated below-average Argentine crop, and with Paraguay's crop suffering a similar fate to Brazil's due to excessive rains, traders will look to the US and Canada," the briefing said.

'Disease and pests' 

The crop in Brazil's core wheat state, Parana, was dogged by heavy rains from July, which witnessed 24cm (10 inches) alone, encouraging the spread of fungal diseases besides causing direct damage.