Commodities Shuttle: War in Ukraine will expand Brazil’s wheat production, assesses Embrapa

The war in Eastern Europe and the global instability in the wheat sector are specific factors, but they should encourage the planting of the cereal in Brazil.

The Brazilian production and export potential will open new paths for the cereal in the coming years. Wheat will follow in the footsteps of corn.

The assessment is by Osvaldo Vieira, chief general of Embrapa Wheat. Both the national and international scenario will lead to this, according to him.

20 years ago, Brazilians produced only 35 million tons of corn per year, but the current potential already exceeds 120 million.

Stuck solely on the domestic market, producers did not have much incentive to produce. With the start of exports and greater liquidity, domestic corn production has been increasing year after year.

For Vieira, the external prices of wheat are high and give support to the internal ones. The demand from the Brazilian industry is good and guarantees producers, since the Argentines, the main exporters to Brazil, are diversifying their markets.

In addition, Embrapa and entities linked to the sector are developing new varieties of wheat according to the requirements of the domestic and foreign markets.

The result is that Rio Grande do Sul’s exports for the first two months total 1.22 million tons, compared to 522,000 in the same period in 2021.

Vieira also highlights the use of wheat in the production of animal feed in Brazil and in the world, due to the high price of other grains. Two years ago, 18% of the world’s wheat production was used for animal feed. This year, the volume is expected to reach 21%, with consumption of 160 million tons by the feed sector, according to data from the USDA (US Department of Agriculture).

Wheat gains new frontiers in Brazil itself. Paraná and Rio Grande do Sul are the main national producers, but the Southeast and Midwest also increase production.

Ceará, Maranhão, Piauí, Bahia and even Roraima are already added to the list of potential producers. Some of these states have good productivity, while in others Embrapa is still making adjustments to seek the best planting period, avoiding rain at harvest.

Brazil has great production and export potential, believes the head of Embrapa Trigo. Temporarily, due to the invasion of Ukraine by Russia, there will be a relocation of world exports, mainly in North Africa, a region served by the two countries at war.

Australia has a presence in Southeast Asia, while Canada and the United States seek the European market. Brazil will be able to dispute the African countries, which is already done by the Argentines. The African market concentrates large importers.

Producers have new perspectives for planting this year in Brazil. Demand, prices and the effects of the war in Eastern Europe on the world market will make the area grow close to 30% in Rio Grande do Sul, expects Vieira.

In the assessment of Consultoria Safras & Mercado, the national evolution will be 33%, compared to 2021. Brazil should sow wheat in 3.6 million hectares, the largest area in the last 36 years, according to the consultancy.

If the weather helps, and average productivity reaches three tons per hectare, national production will be close to 10 million tons. In 2021, it was 7.7 million.

Carlos Hugo Winckler Godinho, a wheat specialist at the Deral (Department of Rural Economy) in Paraná, the main national producer, believes in expanding the area, but he sees some obstacles.

The price of cereal is good, and with liquidity, but production costs are high. They are similar to those of corn, but this one has the advantage of obtaining greater productivity and, this year, the planting is in the ideal period.

The area should grow in the coldest regions of Paraná —from Pato Branco to Ponta Grossa—, but the evolution will be smaller in the warmer regions, such as those from Cascavel to Norte Pioneiro.

Élcio Bento, an analyst at Safras, says that, in addition to costs, the expansion of the area also depends on the supply of seeds. For Vieira, there is seed, but, with the heated demand, the producer may not find the desired variety.

Rafael Furlanetto, technical manager of the Cocamar cooperative, says that the producer will bet on corn until the limit of the ideal planting period.

Wheat prices are good, but costs are high, and the farmer spends more to produce than he earns.

Maciel Silva, coordinator of Agricultural Production at the CNA, says that the war brought great uncertainty to the world market, which could favor the increase in area in Brazil. Production costs, however, are prohibitive.

For the coordinator of the CNA, the adverse climate, which has been repeated in recent years, is a factor also considered by producers. This year, there are no great spaces for expansion of the area, which may occur from the next, he says.

Brazil planted 2.74 million hectares of wheat in 2021, harvesting 7.7 million tons. It exported 2.1 million tons and imported 7 million. Consumption was 12.5 million, according to Conab.