South America Calling

Brazil lifted tariffs on more U.S. and Canada wheat this week amid shortages in South America.

The government lifted the tariff on 600,000 metric tons of wheat imported from outside the Southern Cone, taking the tariff-free quota to 3.3 million metric tons (mmt).

Brazil normally imports over half its wheat from Argentina, Paraguay and Uruguay, but overselling and shortages there, combined with losses to the crop in southern Brazil, prompted Brasilia to lift the 10% tariff.

Brazil has already imported over 2 mmt from U.S. and Canada, and a little more from Eastern Europe, since the tariff-free quota was established in April and should easily import 3.3 mmt by the time the quota expires on Nov. 30.

While Brazil is a massive grain producer, it has struggled to boost wheat production and therefore is one of the world's biggest wheat importers.

Traditionally, it is a captive market for Argentina, but wheat production has decreased there in recent years.

But Brazilian millers haven't been able to get sufficient wheat from Argentina over the last couple of quarters after the government started restricting shipments. It did this after overestimating the amount of wheat available for shipment in the first quarter, prompting a rush to port. The resultant local shortage prompted Argentine wheat prices to hit record levels in the middle of 2013.

Argentine increased wheat area in 2013, but dry weather has hurt the crop, the harvest of which has just started.

Since the 2013 Brazilian wheat crop is 20% smaller than anticipated due to frost and rain, the Argentine losses may mean the improvement in next year's Southern Cone supply situation will not be pronounced despite an increase in planted area.

(AG)

© Copyright 2013 DTN/The Progressive Farmer. All rights reserved.