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Grain and Flour Market in Argentina and Brazil

06 February 201513 min reading
 According to Brazilian Association of Wheat Industry (ABITRIGO) data, 8 million tons of flour was produced in Brazil in 2013. Total flour market in the country is around 8 million 425 thousand tons. According to Argentina Milling Industry Association (FAIM) data, which has hundreds of members, estimated rate of wheat flour production is 3 million 636 thousand tons in Argentina by October, 2014.  Estimated consumption rate of 2014 in the country is 3.5 million tons and annual per capita consumption of wheat flour is 83 kg. ulkeba Brazil and Argentina which are two important countries in terms of economy are also the region’s two leading countries in grain production, consumption and milling. In Brazil which is the global leader in the production of some grain types, agricultural production has spread to nearly one third of the country. Brazil which significantly increased the production of corn in particular ranks third after USA and China in corn production and rose to the second rank in exports. Agricultural production shares 10 percent of the economy and agricultural areas cover almost half of the country. Argentina is one of the leading countries in export of some grains, corn in particular. With its crowded population, its large land and economic policies, it is a promising country for investors. GENERAL ECONOMIC OUTLOOK Brazil is the fifth largest country of the world in terms of its land and population of 202 million. Brazil is also considered to be one of the countries to have a voice economically in 2050s among with Russia, India and China. Besides, it is expected to be economic power in the future with its new oil reserves and natural sources. According to Republic of Turkey Ministry of Economy data; it is forecasted that service sector forms 68.7 percent of the country’s economy in 2014. In addition, it is also forecasted that industry forms 25.8 percent and agriculture forms 5.6 percent of the country’s economy. The share of service sector in economy in 2018 is forecasted to decrease to 68.2 percent. On the other hand, it is forecasted that industry will rise to 26 percent and agriculture will rise to 5.8 percent. In South America, one of the important countries after Brazil is Argentina. Argentina is the second largest country of the region in terms of land area. Argentina which has a population of almost 42 million is the third most crowded country in South America. According to Republic of Turkey Ministry of Economy data; it is forecasted that service sector forms 61.1 percent of Argentinian economy in 2014. The share of industry in economy is forecasted to be 29.5 percent and agriculture is forecasted to be 9.5 percent. In ensuring the economic growth in Argentina, expansionary fiscal policies of the government are thought to be effective. With these policies, the target is to increase the living standards of people with middle or low income and so to increase the rate of consumption too. THE PLACE AND IMPORTANCE OF AGRICULTURE Brazil which globally has an important place in exports of agricultural products is the biggest exporter of soy bean and sugar cane, particularly coffee in the world. Agricultural production has spread to nearly 275 thousand hectares. It can be said that this is almost one third of the country’s land area. In Brazil which has doubled the agricultural yield in the last twenty years, agriculture forms nearly one third of national income when the operations like food processing and handling are included too. Regionally, the southern region where rice, corn and beans are cultivated primarily forms 30 percent of total agricultural economy.  The region is also the largest producer and exporter of tobacco. Southeast has the largest share in agricultural economy with 41.8 percent share. Primary products in this region are fruits, sugar and coffee. Northeast region is both the national leader in banana and manioc production and also the second in rice production compared to the other regions.  The Northern region which is mostly covered by Amazon Forest gives particular importance to the production of banana and manioc. Midwest is the last developed one among other regions in terms of agricultural production and forms 46 percent of soy bean, corn, rice and bean production of Brazil. Agriculture is one of the bases in the economy of Argentina. According to the World Bank data; agriculture which forms 7 percent of total labor force also forms 7 percent of national income. However, this rate has dropped in recent years. Agricultural areas form 54.4 percent of the Argentina’s land in 2012.  Arable land rate is also 14.4 percent. Though 10-15 percent of agricultural areas are foreign-capital, agricultural products form almost half of foreign exchange inflow of Argentina. According to United Nations data; as well as rice and barley, grains like corn, wheat, sorghum are primarily produced and exported. It is known that annually nearly 50 million tons of grains are produced. Apart from that, the other grains produced are oil seeds, fruits, sugar cane and cotton. PRODUCTION AND CONSUMPTION OF GRAINS IN BRAZIL According to US Department of Agriculture, Foreign Agricultural Service (USDA FAS) data; it is seen that corn has the highest production rate in Brazil. Despite the low rising rate of arable land, Brazil showed an increase in corn production. Usage of fertilizer and other various biotech developments caused the yield of corn production to increase. Brazil which ranks third in the production amount of corn in 2013/14 season recorded the highest corn production amount in 2012/13 season. The corn production amount in 2012/13 season is 81 million 500 thousand tons. Production amount, which is 45 million tons on average from 2003/04 season to 2008/09 season, rose to 51 million tons in 2008/09 season and reached its peak in 2012/13 season by showing increase since 2008/09 season.  Brazil which is estimated to produce 79.3 million tons corn in 2013/14 season is also estimated to produce around 75 million tons in 2014/15 season. The production of corn in Brazil is less than the consumption. According to this, the average corn consumption rate of Brazil since 2003/04 season is 46 million tons.  The forecasted consumption amount for 2014/15 season is 56.5 million tons. Another important grain after corn is wheat. The wheat production in Brazil is insufficient to meet the domestic demand so it is imported too. It is forecasted that the highest production amount since 2003/04 season will be reached in 2014/15 season. According to this, the production amount is estimated to be 6.3 million tons. Brazil which is one of the highest wheat consumers shows a steady record.  In the last ten seasons, the highest consumption amount is estimated to be reached in 2014/15 season with 12 million 300 thousand tons. Although rice production is aimed to meet the domestic demand, from time to time exports and imports activities are also operated too.  According to USDA data, the highest rice production in Brazil is reached in 2010/11 season with 9.3 million tons. Brazil which averagely produced 8.1 million tons 2012/13 and 2013/14 seasons is forecasted to reach 8.3 million tons of production in 2014/15 season too. Brazil which remains stable in the production and consumption of sorghum produces and consumes 2 million tons of sorghum on average. Brazil which produces 282 thousand tons of barley consumes 600 thousand tons on average. To meet the domestic demand, from time to time import activities are operated. PRODUCTION AND CONSUMPTION OF GRAINS IN ARGENTINA Argentina is one of the leading corn, wheat, sorghum and barley producers in the world.  Corn has the highest production amount among these grains. According to US Department of Agriculture, Foreign Agricultural Service (USDA FAS) data; the highest corn production was reached in 2012/13 season. Corn production was 27 million tons in 2012/13 season. The corn production which is approximately 22 million tons in the last ten years is sufficient to meet the consumption rate and most of it is exported. The highest consumption rate in corn is forecasted to be reached in 2014/15 season. The production of wheat which is globally leader grain in production rate of Argentina stands with its unsteady production rate. Despite this unsteady rate, it is also sufficient to meet the domestic demand and is exported. In 2007/08 season, the highest production level was reached with 18.6 million tons.  Wheat production which decreased to 9.3 million tons reached to 10.5 million tons in 2013/14 season.  It is also forecasted that 12 million tons of wheat will be produced in 2014/15 season. In comparison to the production rate in the country, wheat consumption is too limited. The consumption rate which was 5.3 million tons in 2003/04 season reached to 6 million tons.  According to the forecasts, 6 million 150 thousand tons of wheat will be consumed in 2014/15 season. It can be said that rice production in Argentina is aimed to meet the domestic demand. 1.118 million tons of rice was produced in 2010/11 season and the production rate was around that in following seasons. It can be said that consumption reached to 350 thousand tons. The production of sorghum and barley is between 2 and 5 million tons and highly sufficient to meet the domestic demand. Import activities are not needed for these grains and the surplus production is exported. GRAIN TRADE IN BRAZIL The product that Brazil traded in highest level is corn. In Brazil which ranks second in world corn export rates, corn export might change depending on domestic consumption demand and does not show a steady increase. According to the US Department of Agriculture, Foreign Agricultural Service (USDA) data, the highest export rate was reached in 2012/13 season with almost 26 million tons. Brazil which exported 12.6 million tons of corn in 2011/12 season is forecasted to have exported 22 million tons of corn in 2013/14. The forecasted export rate for 2014/15 season is 22 million tons. Although corn production is sufficient to meet the domestic demand export activities are also operated. Brazil, which reached its highest import rate in 2006/07 season with 1.4 million tons, imports corn between 500 thousand tons and 1.5 million tons every year. In Brazil where wheat production is insufficient to meet the consumption imports activities are increasing. According to this, wheat import which is 6.7 million tons between the seasons of 2007/08 and 2010/11 has increased over 7 million tons since 2011/12 season. It is estimated that 7.1 million tons of wheat are exported in 2013/14 season. Also in 2014/15 season, almost the same amount of wheat is forecasted to be imported. In exports, it is impossible to see a steady increase. In 2009/10 season, 1.1 million tons of wheat is exported and 1.3 million tons of increase was recorded in the next season. Export rate which is nearly 2 million tons in 2011/12 season decreased to 1.5 million tons in 2012/13 season and receded to 100 thousand tons in 2013/14 season. The forecasted export rate for the season of 2014/15 is 1 million ton. The export and import rates of rice in Brazil are parallel to each other. Rice import which reached to 1.2 million tons in 2010/11 season decreased around 840 thousand tons on average in 2013/14 season. The highest import rate of last 11 years was reached with 881 thousand tons in 2003/04 season. It is estimated that the import rate of 712 thousand tons in 2012/13 season increased to 700 thousand tons in 2013/14 season. Likewise, the forecasted import rate for 2014/15 season is 700 thousand tons. GRAIN TRADE IN ARGENTINA The main product in export of Argentina is corn as it is in Brazil too. In Argentina which ranks as third after Brazil in terms of corn export, corn export rate generally is not steady and is over around 15 million tons. The highest export rate was reached with 22.7 million tons in 2012/13 season. While estimated export rate of 2013/14 season is 12.8 million tons, forecasted export rate is 12 million tons in 2014/15 season. Wheat which is another important grain in Argentinian grain export is one of the grains primarily exported. Wheat export rate which was 11.9 million tons in 2011/12 season decreased to 7.4 million tons in 2012/13 season and showed a more significant decrease and recorded as 1.6 million tons. The forecasted export rate for 2014/15 season is 6 million tons. Low rates of wheat export are quite standing. Another exported product is sorghum. Although there is almost no import activity in Argentina which ranks second in global sorghum export according to 2013/14 season data, export rates of sorghum has not been less than 1 million tons since 2007/08 season. The highest export rate of last ten seasons  was reached with 3 million tons in 2012/13 season. The import rate of rice is also very low as it is in sorghum and corn.  However, that export rate has not been under 400 thousand tons since 2005/06 season is outstanding 732 thousand tons of rice was exported and the highest export rate of the last ten seasons was reached in 2010/11 season.  The forecasted rate for 2014/15 season is 600 thousand tons. FLOUR MILLING İN BRAZIL AND ARGENTINA

Over 10 million tons of wheat is consumed annually in Brazil. According to Brazilian Association of Wheat Industry (ABITRIGO) data, 8 million tons of flour was produced in 2013. 400 thousand tons of wheat was also imported. Total flour market is around 8 million 425 thousand tons. Total number of the flour mills in Brazil is stated as 229 and 77 percent of them are in the South. The total flour milling capacity of all the mills is 10 million ton in a year. It is possible to say that 44 percent of the flour is produced in the southern part of the country. In terms of the flour used in the country, 55 percent of it is used in bakery. 14 percent of it is used in pasta industry and 10 percent in biscuit sector.

According to Argentina Milling Industry Association (FAIM) data, which has hundreds of members, estimated rate of wheat flour is 3 million 636 thousand tons by October, 2014. Estimated consumption rate of 2014 is 3.5 million tons and annual per capita consumption of wheat flour is 83 kg. As it is stated above, flour export rate of Argentina decreased to 124 thousands 890 tons in 2014.although the import rates in 2008, 2009 and 2011 were above 1 million tons, this rate decreased to 953 thousand 149 tons in 2012 and 279.692 tons in 2013. Argentina produced 4,011 tons of wheat and 3.731 million tons of this was consumed.

Sources: 1- USDA Foreign Agricultural Service, https://www.fas.usda.gov/ 2- T.C. Ekonomi Bakanlığı www.ekonomi.gov.tr; 3- Brezilya Buğday Endüstrisi Derneği  (ABITRIGO), http://www.abitrigo.com.br 4- Arjantin Değirmencilik Endüstrisi Derneği (FAIM), https://www.faim.org.ar/
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