Brazil faces prolonged regional wheat shortage after frosts

Several days of frost this week over Brazil’s southern wheat belt has destroyed as much as 5 per cent of the national crop and will prolong the shortage of the grain on the regional market where prices are in record territory, the local flour milling industry association said on Friday.

Board Chairman Marcelo Vosnika of Brazil’s wheat milling association Abitrigo told Reuters that four consecutive mornings of frost destroyed as much as 10 per cent, or 300,000 tonnes, of the wheat crop in Parana, home to about half of Brazil’s annual wheat output.

The wheat that was most affected by the frost would have been the first harvested in September. Prices on the tight local market physical wheat are near record highs at 900 reais a tonne ($400/tonne). Hard red winter wheat in Kansas is quoted at $295/tonne.

“The impact of the frosts as well as the rains is troubling because it’s an impact on the first wheat that will be harvested in September,” said Vosnika. “It’s a time when there is less wheat around, so scarcity has made the moment more critical.”

In the days before the frost hit, rain also fell on some wheat fields that were already forming grains, which can ruin a crop by causing the wheat kernel to sprout. The moisture also creates fertile conditions for disease.

Half of Parana’s nearly 3 million tonne wheat crop is in the stage of flowering or grain formation, which makes it vulnerable to frost. Wheat in Brazil’s other big wheat state of Rio Grande do Sul, which accounts for the other half of national wheat output, is still too young to be hurt by frost.

REGIONAL SHORTAGE

The frosts and rains to a lesser degree will likely force Brazil to turn to North America to make up for the region’s shortage of the grain. Typically Brazil turns to its Mercosur neighbors of Uruguay, Paraguay and Argentina to make up for its own domestic shortfalls in production.

Brazil typically produces only about half of its annual 1-million tonne domestic wheat demand.

Argentina, which supplies Brazil with most of its foreign wheat, recently closed its exports of the grain due to its own record high prices and tight supplies. Limited supplies in Uruguay and Paraguay have all been bought.

Late planting and demands of its milling industry will push back Argentina’s wheat exports to Brazil until early 2014.

Brazil is likely to return to the North American markets, after buying 2 million tonnes of duty-free wheat in the past months from the United States and Canada for delivery by Aug. 31.

Even before the frosts and rain hit, Abitrigo had requested a 3 million tonne duty-free quota for wheat imports to apply to North American supplies of the grain.