“Corn has much greater liquidity, there is a stock exchange to protect against price fluctuations, and it has a very mature export market…”
Roberto Sandoli Jr. is a market specialist in wheat, barley, and malt, responsible for purchasing wheat for the Cooperativa Agrária.
Sandoli Jr. has a degree in financial management and information technology, specializing in market risk management, with an MBA in AI, Data Science, and Big Data.
AgriBrasilis – Why is it not profitable to plant wheat in Brazil?
Roberto Sandoli Jr – This question is relative and depends on who is analyzing it, but wheat has been losing ground to winter corn in regions where the climate allows it. It has also lost ground to barley in southern in the States of Paraná, Santa Catarina, and Rio Grande do Sul, which are regions where winter corn cannot be planted.
Corn has much greater liquidity than wheat. Corn has a stock market to protect against price fluctuations and a well-established and consolidated export market, which is not the case with wheat. In addition, corn does not have the same quality requirements and complexities as wheat: depending on climatic factors, wheat that was planted for human consumption may be destined for animal consumption, which loses a lot in price and can translate into a loss for the farmer. In other words, there is a lot of risk in wheat production and the return may not be very attractive.
Another product that competes with wheat is barley, which is currently priced based on the stock market and the dollar, and this combination, if used correctly, brings a much more attractive price to the farmer, even though it presents a greater risk than wheat. In addition, malting plants provide liquidity for barley, as imported barley is much more expensive. The price of imported barley increases the cost of malt, which causes increased costs for breweries, which also play a key role in promoting domestic barley areas, giving even more liquidity to farmers.
Wheat has its challenges, and if some of them were resolved, the wheat area would tend to increase. At the end of the day, farmers want stability, price transparency, and some guarantee that their product will have liquidity and a fair price so that they can continue planting.
AgriBrasilis – Why is the price of wheat in Brazil rising while the global market continues to fall?
Roberto Sandoli Jr – Brazil is in the off-season, and at this time it is normal for prices to be higher. Prices have started to fall slightly in recent days, perhaps due to the decline of the dollar, which makes parity with Argentina less competitive, and consequently, domestic wheat needs to adjust to remain competitive. In addition, prices may also have fallen slightly due to the progress of the harvest in the US, Europe, and the Black Sea.
In addition to domestic wheat, the only other viable source of wheat today is Argentina, which is also in the off-season, and since Argentine farmers are not selling, prices remain a little firmer. In other words, we have little wheat available at the moment, which justifies the higher levels at this time of year.
“…we may see further pressure on prices due to the high volume of wheat estimated in Argentina”
AgriBrasilis – Will prices remain under pressure?
Roberto Sandoli Jr – The trend now is for them to remain under pressure, with the US making good progress in the winter wheat harvest, as well as Europe and the Black Sea region.
In August and September, the spring wheat harvest takes place in the Northern Hemisphere, and here in Brazil, our harvest begins in Paraná, and we normally experience price pressure during this period. As it is a smaller harvest, this pressure may be limited, at least temporarily, until the Argentine harvest arrives in November. I believe that from then on, we may see further pressure on prices due to the high volume of wheat estimated in Argentina.
AgriBrasilis – How has the weather impacted production?
Roberto Sandoli Jr – In the Northern Hemisphere, in general, it has had a positive impact. There was some stress during the crop development period, but overall the harvest is looking good. There may be some concern about spring wheat, but it should be a one-off issue.
In Argentina, the weather is favorable, with soil moisture levels much better than last year. Some regions have excess moisture, but this is not a major concern at the moment. If the rains continue, there may be some reduction in the planted area, but even so, production should be high, reaching 20 million tonnes or more, weather permitting.
In Brazil, planting ended well, with a smaller area, but positive overall.
AgriBrasilis – How does competition with Russia and the US affect the sector?
Roberto Sandoli Jr – Today, Russia and the US supply the market with different profiles. The Americans focus more on countries that seek higher quality wheat, while Russia focuses on countries that seek price, but obviously they can serve the same buyers. Today, Brazil buys from both countries, and we are always keeping an eye on their fundamentals, because what happens in one will impact the other. They have the potential to significantly alter world market prices and the Brazilian market due to import parity.
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