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Wheat prices in Chicago fell further this week, with Thursday (25) closing at US$ 6.12/bushel, in the first month quoted, against US$ 6.30 a week earlier. Remembering that at the end of February it reached US$ 6.80. The price on March 25th is the lowest in the last three months.
US wheat exports totaled 648,485 tons in the previous week, exceeding market expectations. In the accumulated result for the commercial year, the volume reaches practically 20 million tons exported, just 0.7% below that recorded a year before. Here too, the market awaits the report on planting intentions in the USA, scheduled for March 31st. And in Brazil, prices remain firm. The Gaucho average at the counter closed the week at R$ 78.08/bag, exceeding the average market price of corn. In Paraná, wheat prices ranged between R$ 80.50 and R$ 81.00/bag.
With the difficulties imposed by the new social isolation, in practically all of Brazil, the market is on hold. There is an expectation that demand will improve with the release of new emergency aid from April. However, as the national harvest was again bad in 2020, and imports are expensive due to the exchange rate and international prices, the domestic price of wheat does not budge. This does not prevent the producer market from having concerns about prices for the new harvest, if it arrives full. In this sense, consumer campaigns in favor of national wheat are being carried out, as is the case in Rio Grande do Sul. After all, according to the 2017 Agricultural Census (IBGE), 19,716 rural properties in Rio Grande do Sul cultivated wheat, with the expectation that, in this harvest, the planting exceeds one million hectares, something that has not been seen since 2014.
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Anyway, in market terms, the biggest profit from wheat from the 2020/21 harvest occurred in November last year. According to TF Agroeconomic, at the beginning of last November the average price of wheat in Paraná was R$ 84.10/bag. The average variable cost reached R$ 45.58/bag. Now in March, the average price reaches R$ 90.61/bag, while the average variable cost has risen to R$ 57.11/bag. Thus, in November there was R$ 38.52/bag left, while now in March there was R$ 33.50 left, even with the price increase during this period. However, for the analysis to be effective, the sale of wheat and the purchase of inputs would have to take place at the same time.
That said, the market expected much higher prices at this time given the crop failure and the high costs of importing the cereal. However, there is a strong reduction in consumption, with mills reducing their grinding by 40%, given the uncertainty of the new pandemic wave of the Covid-19 coronavirus in Brazil. In this context, many mills are extending their stocks instead of purchasing more product.
In parallel, the reality of the Argentine market, a major supplier of cereal to Brazil, is that local prices would have little room to rise during the remainder of the year. The reason would be that the Argentine export sector has already practically fulfilled its quota of shipments, while the government continues to pressure to control domestic cereal prices. Therefore, there is still a lot of wheat in the hands of producers (more than 8 million tons), a fact that holds down local prices.
This situation, later on, could also force Brazilian wheat prices to fall, if the future national harvest confirms an increase in sown area and production, this time, is normal. Furthermore, it cannot be forgotten that the Real tends to appreciate until the end of the year, due to the increase in basic interest, a fact that would reduce the cost of imports.
*INFORMATION IS FROM THE REPORT FROM THE INTERNATIONAL CENTER FOR ECONOMIC ANALYSIS AND AGRICULTURAL MARKET STUDIES
By: Aline Merladete | agrolink
