Argentina to Double Wheat Sales to Brazil with Crop Rejuvenation

Argentina is on the cusp of a substantial upswing in wheat exports to Brazil, positioning itself to outpace competitors such as Russia in the pivotal global agricultural market. Forecasts from Brazilian trader Serra Morena SA point to a significant increase in wheat shipments, commonly utilized in popular Brazilian products like "French rolls," with an expected monthly average of 450,000 metric tons in 2024. This surge could potentially lead to annual trade surpassing 5 million tons, nearing historical highs. To contextualize, the current monthly average for this year hovers around 188,000 tons, with annual shipments totaling approximately 2 million tons based on trade data through October.

Argentina, recognized as one of the world's primary wheat suppliers, predominantly serves its neighboring Brazil. The anticipated spike in exports stems from a partial recovery in Argentina's domestic wheat output following last season's unprecedented decline—the most severe in over three decades. The government implemented measures to secure domestic supplies in response to this significant drop, consequently impacting the available supply for shipment through 2023.

In stark contrast, Brazilian farmers are contending with the lowest crop yields in six years, a consequence of excessive rains induced by the El Niño weather phenomenon. Argentina's anticipated larger wheat crops are poised to further strain the world wheat market, which is already grappling with abundant supplies from Russia, the leading exporter. Wheat futures traded in Chicago have witnessed a decline of roughly 20% in 2023.

Projections suggest a 20% growth in Argentina's wheat output this year, reaching 14.7 million metric tons, as reported by the Buenos Aires Cereals Board of Trade. Conversely, Brazil is expected to experience a 23% reduction in production from the previous season, according to the National Supply Company.

In Brazil, the largest economy in Latin America, wheat processor Infasa Industria de Farinhas SA, based in the state of Parana, intends to double its purchases of Argentine wheat next year. Additionally, Cooperativa Agraria Agroindustrial Ltda aims to triple its imports, according to representatives from both companies.

The anticipated surge in supply from Argentina is likely to divert Brazil's attention away from Russia, which played a role in filling the supply gap left by Argentina during its production downturn. Prices for Argentine wheat, enjoying tariff-free export to Brazil under the Mercosur trade bloc's rules, are expected to remain competitive with Russian supplies at least until May, according to Walter Von Muhlen from Serra Morena. He suggests that buyers may reassess Northern Hemisphere crops from mid-year onwards. This strategic shift underscores the dynamic nature of the global wheat market and the intricate balance of factors influencing trade dynamics between major suppliers and consumers.