April 9, 2015

 

US may lose out to Argentina in wheat trade to Brazil

 

 

The lifting of restrictions on Argentina's wheat exports is likely to widen the supply line to Brazil but the latter's other supplier, the US, will be affected by the development, with an estimated loss of more than 60% in deliveries. 

 

US wheat exports to Brazil will drop to one million tonnes in 2015-16, on an October-to-September basis. Being the lowest in four years, the volume represents a slip from 2.7 million tonnes this season and 4.13 million tonnes in 2013-14, Agrimoney.com reported.

 

Shrinking exports to Brazil would prove to be a critical blow to the US wheat sector.

 
Burdened with the costliness of its wheat due to a rising dollar and thus, less appealing prices for international sales, a 23% fall (to 24.5 million tonnes) in 2014-15 shipments loomed ahead for the States.

 

Eventually, the EU, backed by the bloc's robust output, could replace the US as the world's top wheat exporter.

 

In the meantime, given the more optimistic outlook on its local productions, Brazil's wheat import could decline to 6.5 million tonnes, a drop of 200,000 tonnes, according to the USDA's Brasilia bureau.

 

It added that Brazil has been strengthening wheat quality through investments in creating better seed varieties over the last two years.

 

Argentina has been coping with the difficulties of exporting its wheat as a quota system, called the ROE, has been in force since 2007 to protect local consumers from high food prices by controlling exports.

 

While US wheat continues to be a viable option for Brazil, the Argentine elections in October, together with a change of government, could turn the tables around. The result would be an easing of restrictions and possibly, the dismantling of the ROE.

 

"Brazil would be the (potential) market for the vast majority of Argentina's wheat exports", the USDA Brasilia bureau said.

 

Wheat output in Argentina had risen to 7.2 million tonnes in 2016, an increase from 55 million tonnes this season and 2.2 million tonnes in 2013-14, based on observations by US foreign staff.