Brazil expected to import more wheat from outside Mercosur this year to meet demand

In July, Russia sold two loads of wheat to Brazil, totaling 60,000 tonnes. According to industry sources, it was the first purchases made by Brazilians of the Russian product this year.

Purchases of Russian cereal, which were confirmed by the two traders involved in the deals – Sodruzhestvo and Glencore – are relatively atypical, since Brazil has most of its needs met from Mercosur countries, without paying tariffs.  In addition, the Russian product can only be processed in mills at the ports, for phytosanitary reasons, which limits the agreements, which are normally more restricted to North American countries when carried out outside the commercial block.

Data from the Brazilian government indicates that throughout the past year, the country imported 91,700 tonnes from Russia. In 2018, there were only 26,200 tonnes.  However, anonymous sources say that at least two other agreements for Russian wheat have been closed recently. These additional deals could not be confirmed.

This year there is more potential for Brazilians to do deals with suppliers from the northern hemisphere after Brazil established a quota, at the end of 2019, for 750,000 tonnes/year to be imported free of the 10% tax normally applied on imports from outside Mercosur. Moreover, expectations are for record imports of 7.3 million tonnes by Brazil in 2020, amid a steady consumption of wheat products in the face of the pandemic.

Brazil imported about 3.5 million tonnes of wheat in the first half, up just over 150,000 tonnes compared to the volume imported in the same period in 2019.  Argentina was the main supplier, exporting 3.12 million tonnes to Brazil, compared to 2.96 million tonnes in the first half of last year.

The United States appears in second place, with 172,000 tonnes (compared with 72,000 tonnes in the first half of 2019), followed by Paraguay and Uruguay, with 97,000 and 80,000 tonnes, respectively.

With the coronavirus crisis and the surge in the dollar to historic highs this year, the wheat industry in Brazil, one of the largest global importers of the cereal, managed in June to obtain an additional import quota of 450,000 tonnes from outside Mercosur, free of import tariffs.

Source: Reuters

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