Why was there so little participation in Conab's wheat auctions, if they were so sought after by the sector? The senior analyst at Consultoria Trigo & Farinhas, Luiz Carlos Pacheco, explains that the answer lies in the final net prices in each state. “In Paraná, the premium offered did not cover the purpose for which it was proposed, which is to guarantee the payment of the minimum price to the farmer in the interior of the state”, points out the expert.
The second group of wheat auctions from the 2016/17 harvest in Brazil sold less than half of what was offered, or exactly 42.46%. The PEPRO auction sold 67.61% and only in Rio Grande do Sul, with zero interest in Paraná and Santa Catarina. The PEP auction sold only 2% of the offers and only in RS.
“The calculation is as follows: current price R$ 35.00/bag or R$ 583.45/tonne. If we add the auction prize of R$ 182.50 offered by the government, it would be R$ 765.95 placed at the port (where the merchandise necessarily has to be taken to ship it, either to the mills in the northeast or for export, because the auction notice prohibits it from being sold to the states of the South, Southeast and Midwest). The cost to take to the port, between freight, reception, storage, documentation and boarding on ships, plus commissions and miscellaneous fees is approximately R$ 152.13/t, leaving a net for the producer of R$ 614.60 (or R$ 36.87/bag) that is, R$ 29.6/ton less than the minimum price, not to mention that there is no remuneration provided for cooperatives and cereal growers to carry out the work on behalf of the farmer (because they are the ones who do everything) ”, explains Pacheco.
The T&F analyst states that no one will want to “work for free and still have to cover the gap between the promised price and the price granted by the government and not be reimbursed? For their part, producers in the state are storing their wheat and asking for a minimum of R$ 40.00/bag to sell it. That’s why they were left out.”
“In Rio Grande do Sul, the situation is different: the same calculation above guarantees R$ 36.87/bag in the interior, when the Rio Grande do Sul wheat farmer today receives around R$ 29.00/bag, a difference of 27.14% more than current stone prices in the state. So the auction was worth it and the market jumped in with a vengeance, grabbing 100% of the lots, competing for prices in such a way as to reduce the premium by 17.29%. It is estimated that 85% of the PEPRO bidders were producers (via cereal farmers?) and 15% were cooperatives”, he adds.
Pacheco points out two conclusions: The first is that the auctions are not guaranteeing the Federal Government's Minimum Price of R$ 644.20/t to be paid to the farmer; and the second is that the auctions are not improving the general level of the physical market, because they are not reducing enough stocks to do so, but only those of the lots offered on the auction floor. The physical market did not move (in fact it fell a little in some regions of PR).
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