Brazil to buy U.S., Canada and Russia wheat as Argentine supplies dwindle

Brazil will need to seek alternative wheat sellers because Argentina’s crop failure has curtailed production and compromised its ability to export, analysts said, pointing to the United States, Canada and even Russia as possible suppliers.

Brazil is a net wheat importer and neighboring Argentina, which is currently suffering a drought, is its most important source of the cereal.

“Generally, Brazil gets about 6 million tonnes from Argentina,” said StoneX risk management consultant Fabio Lima. But now, he expects between 1 and 1.5 million tonnes of imports coming from outside Mercosur, the South American trade bloc.

Brazil is one of the world’s largest wheat importers, with domestic consumption above 12 million tonnes per year, below its output capacity.

In the 2021 to 2022 commercial year that ended in July, Brazil imported only about 155,000 tonnes of wheat from countries outside the Mercosur. In turn, the year before, it purchased almost 900,000 tonnes from the United States, Canada and Russia, according to Brazilian government data.

Aside from the drought in Argentina, Brazil’s key producer Parana is facing excessive rains, also compromising domestic supplies.

The Mercosur Common External Tariff (TEC) is zero for imports of some products this year, including wheat. Brazil also has an annual 750,000-tonne wheat import quota that is exempt from the tariffs.

Lima said it is difficult to estimate how much wheat will come from outside Mercosur. He cited rumors of potential cargo from Russia, but could not elaborate.

Carlos Cogo, from Cogo Intelligence, cited the United States, Canada and Russia as potential alternative suppliers for Brazil. But he cautioned buying from them will be expensive, potentially fueling domestic inflation.

According to Cogo data, Argentina has already sold almost 9 million tonnes from their 2022 to 2023 crop, leaving very little additional supplies and pushing prices higher.

Source: Financial Post

To read the full original article, please go to: https://financialpost.com/pmn/business-pmn/brazil-to-buy-u-s-canada-and-russia-wheat-as-argentine-supplies-dwindle

Sharing is caring!