With low liquidity in the domestic market and international prices not supported due to the ample Russian supply of wheat, domestic cereal prices do not encourage an increase in area for the 2024 harvest, which should begin in a few weeks. In the last week of March, a ton of cereal dropped, ending at R$ 1,244, a drop of 0.53% in the period. In the state of Rio Grande do Sul, product prices fell the most in the last 30 days, with wheat from Rio Grande do Sul priced at around R$1,173/t, a drop of 2%.
CONAB, in its latest report, corrected the total area for the next wheat harvest downwards by 210 thousand ha, totaling an area of 3.2 million ha, a drop of 6.5% compared to the previous harvest. The justifications are unfavorable prices for the producer and an exchange ratio with inputs above the average of the last 5 harvests, with the exception of KCl. The combination of a smaller area and an average productivity of recent harvests (2.9 t/ha) results in production of 9.6 million tons, an increase of 18.9% compared to the last harvest.
Even with the reduction in area, La Niña in the second half of the year should favor the quality and productivity of crops in the field. As for exports, they lost traction, but year-to-date they remain at good levels. The reallocation of routes and freight creates windows of opportunity to sell wheat at lower costs to Asian countries. The accumulated between Jan-Feb 2024 was 1.3 million tons, an increase of 16.8% compared to the same period last year. In imports, with the industry’s need to acquire quality products for flour blends, purchases in the two months of the year grew 56.6% compared to the same period last year, totaling 1.145 million tons.
Even with falling prices, volatility arising from political uncertainties and the conflict in the Black Sea can generate price opportunities for cereals around the world. In the main wheat exporter, after the local election, Russia must now focus its efforts on the conflict in the Black Sea and resolving the attack that occurred on the last Sunday of March. These political uncertainties in the region could bring volatility to prices in the main cereal markets. It is worth noting that Russia has a surplus of wheat of around 50 million tons, whose export window is short due to the weather and, with the arrival of the next harvest, this situation of need to sell wheat could work against local prices. of cereal.
In the USA, exports are slower than last year and, consequently, increasing the volume of local stocks. This perception of greater volumes in warehouses has been one of the factors putting pressure on CBOT quotes. On the American stock exchange, until the beginning of the last week of March, prices fell 5.0% in 30 days, quoted at USD 5.44/bu (26/Mar). In Brazil, the price scenario must follow the global scenario. Imports from Argentina, our main supplier, should remain firm due to the local difficulty in finding quality wheat as a result of the crop failure last season. Argentine exports should be around 10 MM and compete with low prices and freight with large markets such as Russia, USA and EU, therefore, significant price increases due to import parities do not seem to be a possibility in the short and medium term . For the industry, this scenario alleviates consumer pressure regarding food inflation and maintains margins. For producers, margins must remain squeezed throughout the harvest.
