Brazil will have to look for other sellers of wheat as Argentina’s poor harvest has reduced its production and compromised its ability to export, analysts said, citing the United States, Canada and even Russia as possible suppliers.
Brazil is a net importer of wheat and neighboring Argentina, which is currently suffering from drought, is its main source of cereals.
“Generally, Brazil receives around 6 million tons from Argentina,” said Fabio Lima, risk management consultant for StoneX. But now he expects between 1 and 1.5 million tonnes of imports from outside Mercosur, the South American trading bloc.
Brazil is one of the largest wheat importers in the world, with domestic consumption exceeding 12 million tonnes per year, below its production capacity.
In the 2021 to 2022 marketing year that ended in July, Brazil imported only about 155,000 tons of wheat from countries outside Mercosur. In turn, the previous year, it bought almost 900,000 tons from the United States, Canada and Russia, according to Brazilian government data.
In addition to the drought in Argentina, the main Brazilian producer, Parana, is facing excessive rains, also compromising domestic supplies.
Mercosur’s common external tariff (CET) is zero for imports of certain products this year, including wheat. Brazil also has an annual wheat import quota of 750,000 tonnes which is duty free.
Lima said it was difficult to estimate the amount of wheat coming from outside Mercosur. He cited rumors of a potential shipment from Russia, but could not elaborate.
Carlos Cogo of Cogo Intelligence cited the United States, Canada and Russia as potential alternative suppliers to Brazil. But he warned that buying from them would be expensive, potentially fueling domestic inflation.
According to data from Cogo, Argentina has already sold almost 9 million tonnes of its 2022 to 2023 crop, leaving very little additional supply and driving up prices.
Source: Reuters (report by Roberto Samora written by Ana Mano edited by Josie Kao)