September 30, 2005

 

Brazilian wheat production might fall for 2005-06

 

Brazilian wheat production was expected to fall by one million tonnes for 2005-06, despite record harvests in 2003-04 and 2004-05, US Wheat Associates said. Poor weather during planting, a strong Brazilian currency and the elimination of a wheat import tax were factors expected to cause the decline.

 

Since March this year, the Brazilian real has appreciated by over 17 percent, decreasing prices of wheat imports. Millers were also not willing to pay more for domestically produced wheat with the appreciation.

 

Meanwhile, Brazilian millers also succeeded in lobbying for the repeal of a transportation tax that would reduce wheat import taxes by 12 percent. This further weighed on domestic wheat prices.

 

Further reducing domestic prices, Brazilian millers were successful in lobbying for the repeal of a transportation tax that will reduce import taxes on wheat by 12 percent.

 

Pasture and alternative cover crops have replaced wheat acreage due to the low wheat prices,

the US Foreign Agricultural Service in Brazil said.

 

Although the real appreciated, high energy costs resulted in increased fertiliser prices and lower fertiliser application rates. This led to lower yield expectations.

 

The USDA also forecast Brazilian wheat production to fall by one million tonnes from 5.8 million tonnes harvested last year.

 

Meanwhile, Argentine farmers had recently finished planting the wheat crop for 2005-06. The USDA estimated Argentina's wheat planting area had fallen 16 percent from 2004-05 and was 17 percent less than the five-year average.

 

This was due to persisting drought within the country.

 

Argentina's government estimated domestic wheat production for 2005-06 at 13 million tonnes, while the USDA's forecast was 12.5 million tonnes. Both estimates represented a fall from 16 million tonnes in 2004-05.

 

The USDA also expected Argentine wheat exports to decline by 3.3 million tonnes as a result of the fall in production, down 31 percent from 10.8 million tonnes the previous year.