April 18, 2008

 

Brazil offers new incentives to wheat growers, ups floor price

 

 

The Brazilian government announced Thursday an increase in its minimum-price programme for wheat, increasing the floor price by 20 percent in an attempt to entice farmers to plant more wheat.

 

The immediate adjustment brings the wheat price floor up to BRL480 (US$289.15) per tonne, or BRL28.80 per 60-kilogramme bag, compared with BRL400 a tonne prior to the announcement.

 

Current market prices for wheat, however, have farmers in Parana, the number one wheat state, getting BRL42 per 60-kilogramme bag, 46 percent more than the government minimum.

 

The government's aim is to increase wheat plantings this winter by as much as 25 percent, for a total output of 4.7 million tonnes.

 

Brazil harvested around 3.5 million tonnes last season.

 

If Brazil harvested 4.7 million tonnes of wheat, it would still need to import more than 6 million tonnes from Argentina and elsewhere to meet demand.

 

The Agriculture Ministry also announced on Thursday that it would increase a special credit line for wheat farmers, with interest rates fixed at 6.75 percent annually.

 

The incentives come at a time when Brazil's main wheat trading partner Argentina remains closed to new wheat exports, and local wheat prices are rising because of supply constraints.

 

Production costs in Brazil have risen between 18 percent and 34 percent since 2006 due to the rising price of fertilizer as demand from farmers around the world continues to pressure prices.

 

US$1 = BRL1.66 as of April 18, 2008