Grains

Wheat prices jump over 25% in the last two months

Jan, 26, 2020 Posted by Sylvia Schandert

Week 202005

The drought in Australia, the loss of production in Russia, the logistical problems in France, the unfavorable climate for the new harvest in the United States, Europe and the Black Sea regions, and even greater demand from Asian countries are some of the factors that are driving up wheat prices worldwide.

Argentina, the main supplier of wheat to Brazil, was the country most favored by the general situation. They benefitted from the strong increase in demand, increased competitiveness in the international market and the rapid commercialization of this harvest by local producers. A total of 75% of the newly harvested crop of 18.5 million tonnes has already been sold, leaving a low volume that can be exported.

As a result this led to a sharp rise in Argentine wheat prices, that reached almost 26% over the last 60 days, from US $ 190 per ton FOB to US $ 240.

Brazil’s national wheat, has, in turn, followed the increase of international prices, mainly due to the sharp 33% drop in production in Paraná, due to drought and frost climate issues.

Wheat prices in Paraná increased from R$ 850 per ton to R$ 1,000 (+ 18%), and in Rio Grande do Sul they increased from R$ 700 per ton to R$ 900 (+ 28%) in a few weeks.

There is also supply pressure in large markets such as São Paulo and Minas Gerais, which have already sold their entire national crop.

According to Abitrigo, this turbulent period will continue at least until the beginning of the next harvest in mid-September.

A further important factor for Brazil’s market is the large devaluation of the real against the dollar, which jumped from R$ 4.00 in early November 2019 to the current R$ 4.18 (+ 4.5%).

For Abitrigo, there is now a strong cost pressure on Brazilian wheat mills, which should drive a significant increase in flour prices over the coming weeks.

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