October 15, 2004

 

 

Brazil To Hold First Wheat-Options Auction Next Week

 

Brazil will hold its first in a series of wheat- options auctions on Oct. 21 as part of a program to boost domestic production, Brazil's Secretary of Agricultural Policy Ivan Wedekin said Thursday.

 

The government is offering the program to enable producers to wait for higher prices later in the year. Brazil is one of the world's largest wheat importers, but domestic production has been on the rise in recent years in part due to government inventive programs.

 

The government expects to sell all of the option contracts in three upcoming auctions, because the offer price is well above the current market price for wheat.

 

The government will pay 428.75 Brazilian reals ($1=BRL2.87) per metric ton for contracts in southern Brazil and BRL458.75 per ton for other regions of the country.

 

According to Wedekin, wheat prices in the state of Parana, Brazil's No. 1 producer, are oscillating between BRL370 and BRL380 per ton

 

At the first auction, the government plans to sell contracts worth 216,675 tons, roughly one-third of the total amount of options the government plans to offer this year. The first options contracts will come due in January 2005.

 

The government has divided the contracts into 27-ton lots, with the largest number of lots being offered to Rio Grande do Sul, followed by Parana.

 

The government will hold its next auction on Oct. 28 for contracts that will come due on Feb. 15. Prices for the second auction are marginally higher, with producers in southern Brazil BRL434.36 and BRL464.36 for other states.

 

The government has not yet set the date for the third contract auction.

 

Wedekin said that if all of the contracts are sold, as expected, the program will cost the government a total of BRL300 million.

 

Brazil expects to harvest 6.07 million tons of wheat this season, its second-largest harvest in history. Last year, Brazil harvested 5.9 million tons of wheat.