Brazil bought 25,000 tons of wheat from Russia, the first cargo in eight years, Reuters reported. In December 2017, Brazilian Ministry of Agriculture had published a new set of regulations to allow the importation of Russian wheat.
Brazil has bought a cargo of 25,000 tons of wheat from Russia, according to two sources with knowledge of the negotiations, the first such deal since both countries’ governments finalized talks to liberalize bilateral grain and meat trade in December. The sources, who asked not to be named because the talks are private, told Reuters that the cargo headed to ports in northeast Brazil to supply mills located in the region. This is the first import deal for Russian wheat since 2010, when Brazil bought 29,700 tons, according to Brazil’s Agriculture Ministry. Before that, there was only one deal reported in 2002 for 9,900 tons.
Phytosanitary issues have for years barred any potential Brazilian deals for Russian wheat. But Brazil and Russia opened talks last year in an effort to find a common ground for trading of cereals and meat. The Russian government was hoping to find new markets for its grains after bumper harvests and Brazil was looking to expand sales of poultry, beef and pork.
Late last year, Brazil published new legislation clearing imports of Russian wheat. But last December, Russia placed temporary restrictions on imports of pork and beef products from Brazil after a banned food additive was found in some shipments. One of the sources said the wheat cargo was sold by commodities trader Sodruzhestvo. There was no exact information regarding the buyer.
Brazil is one of the world’s largest grain producers, but grows mostly soybeans and corn. The country is a net importer of wheat and sources most of the cereal in neighbor Argentina, which is not subject to any tariffs since both countries are members of the Mercosur trade bloc. Wheat imports from other origins outside Mercosur, which is comprised by Brazil, Argentina, Paraguay and Uruguay, are subject to a 10 percent tariff.
“Northern Brazil is not so close to Argentina freight-wise. It is common for them to get wheat from other origins. The most demand and population are in the central to southern regions (of Brazil), where Argentine wheat is competitive,” said David Hughes, president of Argentina’s wheat industry chamber Argentrigo.
2017/2018 wheat production in Brazil is estimated at 4.264 million tons, down by more than a third from the previous year as a result of adverse weather during critical development stages of the crop and some abandoned hectares. 2018/2019 production is forecast at 6 million tons on a return to more normal yields. Like other crops in this region, wheat area has been squeezed in recent years by expanding soybean hectares, as farmers try to increase revenue with a relatively more profitable crop. USDA estimates 2017/2018 wheat imports at 7 million tons. Imported wheat makes up roughly half of Brazil’s domestic consumption. 2018/2019 imports are forecast at a stagnant 7 million tons, to compliment an expected return to normal yield and production levels.