2015/16 Wheat Supplies: Planted area in 2015/2016 is expected to see a 5 percent reduction to 2.6 million hectares (mHA) as a result of reduced profitability last year and higher input costs due to a strong U.S. dollar. While planted area will decrease, production is estimated to increase 10 percent to 6.5mHA from the previous year based on the assumption of normal weather. The torrential rains, excessive temperatures, and fungus issue of 2014 are not expected to be a factor in 2015/16. Over the last two years, Brazil has been investing in developing better seed varieties to improve wheat quality.

2015/16 Wheat Trade:Imports for 2015/2016 are forecast at 6.5 mmt, a three percent decrease from the previous year based on a stronger dollar. Brazil will need to import, even though production is forecast higher, as it needs high quality imports to blend with domestic wheat. At this point, economic uncertainty in Argentina continues to make U.S. wheat imports more viable. However, Argentine elections and a new government could make substantial economic policy changes that could provide more certainty to Brazilian importers.

2015/16 Wheat Consumption:Wheat consumption in 2015/16 is expected to remain the same as the previous year at 11.6 mmt. The cost of wheat based products, such as pastas, cookies, and crackers are expected to increase 8 percent due to rising costs. For importers, the strong dollar is increasing the price of wheat imports, which is expected to be slightly more than half of total supply. In addition to the strong dollar, a severe drought in the state of Sao Paulo is causing energy prices to go up nation-wide, further increasing the cost of production. Some estimate that energy prices could rise up to 38 percent.

2014/15 Wheat Supplies: Planted area for 2014/2015 is up 18 percent from the previous year to 2.73 mHA. Production, however, is only forecast to increase by 10 percent to 5.9 mmt due to bad weather and a fungus that reduced quality below acceptable domestic levels for nearly two-thirds of the wheat in the state of Rio Grande do Sul, the second largest wheat producing state in Brazil. This has led to lower prices that have continued through the first quarter of 2015. The largest producing state of Parana was not severely affected despite some flooding on the southern boarder during planting.

2014/15 Wheat Trade: Wheat exports in 2014/15 are forecast at 1.5mmt as a result of a poor crop with below average quality for domestic use. The exports were of low quality, but still contained a high gluten content and were primarily used for feed wheat or flat bread. 2014/15 imports are forecast at 6.7 mmt, a 4 percent decrease from the previous year. Argentina, typically Brazil's main supplier, has faced economic uncertainty over the last two years and has lost their foothold on the Brazilian market to North American wheat. For the second year in a row, almost half of the imported wheat originated in the United States. It is unknown if Brazil will reduce its Common External Tariff (TEC) from 10 to zero percent again this year, but the strong U.S. dollar may make it more difficult for U.S. wheat to compete with imports from Mercosul countries. Some Brazilian millers have expressed a preference for U.S. wheat as the higher quality does not cause any problems when milling. In 2014, Brazil was the third largest market for U.S. wheat with 2.6mmt, just behind Japan and Mexico.

2014/15 Wheat Consumption: Consumption in 2014/2015 is forecast at 11.6 mmt, a 2 percent increase due to increased feed wheat as a result of a poor crop. An economic slow-down, combined with the depreciation of the Brazilian currency, will likely keep consumption stable for the next two years.

S&D Wheat Brazil

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Oct 2013

Oct 2014

Oct 2015

Brazil

USDA Official

New post

USDA Official

New post

USDA Official

New post

Area Harvested

2,200

2,200

2,730

2,730

0

2,600

Beginning Stocks

1,001

1,001

1,887

1,887

0

1,187

Production

5,300

5,300

5,900

5,900

0

6,500

MY Imports

7,066

7,066

6,700

6,700

0

6,500

TY Imports

7,061

7,061

6,700

6,700

0

6,500

TY Imp. from U.S.

4,134

4,134

0

2,700

0

1,000

Total Supply

13,367

13,367

14,487

14,487

0

14,187

MY Exports

80

80

1,500

1,500

0

1,000

TY Exports

81

81

1,500

1,500

0

1,000

Feed and Residual

600

600

600

800

0

600

FSI Consumption

10,800

10,800

11,000

11,000

0

11,000

Total Consumption

11,400

11,400

11,600

11,800

0

11,600

Ending Stocks

1,887

1,887

1,387

1,187

0

1,587

Total Distribution

13,367

13,367

14,487

14,487

0

14,187

1000 HA, 1000 MT, MT/HA

Brazil Wheat Imports

Brazil Wheat Imports HTS 100110 and 100190

Wheat, Group 60 (2012)

Partner Country

Quantity (Unit: 1,000 mt)

CY2012

CY2013

CY2014

World

6,580.43

7,273.28

5,783.03

United States

54.51

3,475.27

2,639.55

Argentina

5,059.95

2,539.71

1,569.46

Paraguay

836.26

522.08

172.79

Uruguay

628.69

408.03

1,079.24

Canada

0.99

328.12

321.95

Brazil Wheat Flour Imports

Brazil Wheat Flour Imports HTS 1101

Wheat Flour, Group 44 (2012)

Wheat Equivalent (conversion 1.368)

Partner Country

Quantity (Units: 1,000 mt)

CY2012

CY2013

CY2014

World

870.77

258.95

337.53

Argentina

806.32

137.77

269.83

Uruguay

42.19

50.17

38.29

Paraguay

18.72

65.51

11.94

Turkey

0.00

1.62

10.67

Peru

0.00

0.00

1.71

Italy

0.89

1.02

1.29

Canada

2.17

1.77

1.26

Netherlands

0.00

0.31

1.12

Suriname

0.00

0.00

0.53

France

0.06

0.45

0.26

United States

0.29

0.19

0.22

China

0.00

0.00

0.15

India

0.00

0.00

0.06

Portugal

0.00

0.01

0.06

United Kingdom

0.10

0.08

0.06

Greece

0.00

0.00

0.03

Belgium

0.02

0.05

0.02

Lebanon

0.00

0.00

0.02

U.S. Wheat Exports to Brazil

U.S. Wheat Exports to Brazil (tons)

CY2009

CY2010

CY2011

CY2012

CY2013

CY2014

218,145

494,008

104,248

54,508

3,475,270

2,639,554

Brazil Wheat Exports

Brazil Wheat Flour Imports HTS 1101

Wheat Flour, Group 44 (2012)

Wheat Equivalent (conversion 1.368)

Partner Country

Quantity (Units: 1,000 mt)

CY2012

CY2013

CY2014

World

2404.90

1188.30

277.00

Philippines

0.00

0.00

115.20

Vietnam

0.00

0.00

69.83

Thailand

0.00

0.00

53.87

Paraguay

0.30

9.54

38.09

Source : Secretaria de Comércio Exterior

Brazil Wheat Prices

Monthly Average Wheat Prices in Paraná

Prices in R$ per Metric Ton

(discounted by the NPR tax)

CY

2011

2012

2013

2014

Jan

457.81

440.54

765.24

764.48

Feb

473.89

447.64

755.78

764.49

Mar

493.59

460.69

736.77

795.35

Apr

499.40

472.41

712.25

836.27

May

496.20

486.87

726.00

821.07

Jun

493.18

503.05

793.94

779.23

Jul

488.19

515.99

884.48

690.33

Aug

480.21

568.48

957.18

587.71

Sep

480.92

617.24

971.96

523.78

Oct

474.28

622.26

898.63

530.97

Nov

458.68

648.13

797.53

545.57

Dec

447.72

714.78

757.39

545.27

Government Support for Commercialization and Export:

Total government support across all commodities was down over 30 percent from the previous year by weight to 8.3mmt, which is the lowest since 2008. However, over three-fourths of that went to the Equalizing Premium Paid to the Producer (PEPRO) programs for wheat and corn, with corn receiving 5.8 mmt of support through the program.

In September 2014, the government of Brazil reduced the amount of support they were initially willing to provide from R$500 million to R$300 million (US$227 and 136 million, respectively). This signaled that the government may not be able to provide as much support in the face of continued low global prices, an economic slow-down in Brazil, and a government that is trying to rein in spending. The government has the opportunity to update the minimum price once a year, and the price varies by commodity and classification, and by region of the country. This typically takes place in May/June.

The Brazilian government provided support for 810,000 metric tons of wheat, mostly through the PEPRO program in 2014. The minimum price in the state of Parana during the harvest was R$557.50/mt (US$253.41/mt).

Government Support for Wheat (Quantity Unit: 1,000 mt)

Program

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

Acquisition (AGF)

21.3

373.8

0.2

445.70

0

15.0

PEP

1,113.2

3,261.3

1,786

1,594.03

0

0

PEPRO

0

0

0

86.72

0

794.83

Total

1,416.9

3,635

1,786.4

2,126.45

0

809.83

Production

4,081.9

5,026

5,881.6

5,788.6

4,380

5,300

Participation %

34.7%

72.3%

30.4%

36.7%

0

15%