A vital grain producer

by Chris Lyddon
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South America has become a vital exporter to world grain markets, with its location in the South Hemisphere putting it in a position to supply when many more traditional suppliers are running low.

For 2014-15, the International Grains Council (IGC) puts total South American wheat production at 23.9 million tonnes, up from 19.9 million the year before. That includes 12.9 million tonnes in Argentina, up from 10 million tonnes and 6.6 million tonnes in Brazil, up from 5.5 million tonnes. Production in Chile is put at 1.3 million tonnes, compared with 1.4 million the year before, while Uruguay’s production is put at 1.6 million tonnes, down from 1.7 million in the previous season.

South America is also a major player in the world’s maize crop.

“World maize production in 2013-14 is placed at a record 972 million tonnes, up 2 million from last month, following a revised forecast for Brazil’s second (safrinha) crop,” it said.

It puts South America’s total maize crop for 2014-15 at 110.7 million tonnes, down from 111.6 million the year before. The biggest South American maize producer is Brazil with a 2014-15 crop of 73 million tonnes, down from 77 million the previous year. Argentina’s maize crop is put at 27 million tonnes, up from 24 million in 2013-14. Colombia’s crop is put at an unchanged 1.7 million tonnes, while Paraguay’s crop has risen to 2.7 million tonnes from 2.5 million. Uruguay’s maize crop is predicted at an unchanged 1.4 million tonnes and others account for 4.9 million tonnes of maize, down from 5 million tonnes.

Brandon Crozier, Chief Executive Officer, Nidera Brazil & EVP of Americas, told the recent IGC Conference in London that from 1999 to 2006 Brazilian maize exports represented an average of 7% of the total production. In 2007, the Black Sea region faced a series of climate issues affecting E.U. corn supply, and in 2007 the E.U. imported 65% of all Brazilian corn exports.

“Starting in 2009, Asian markets began to seek Brazilian corn supply due to improving quality,” he said. “In 2013, exports represent 35% of total production.”

South America is a major barley producer, with a forecast (by the IGC) 2014-15 crop of 4.9 million tonnes, down from 5.8 million the year before. Argentina is the dominant producer with a forecast crop of 3.8 million tonnes, down from 4.7 million. Sorghum is also important. The region has a total forecast 2014-15 crop of 7.8 million tonnes, up from 7.3 million the year before. Argentina is the leading producer with a forecast crop of 4.7 million tonnes, up from 4.2 million, followed by Brazil with a forecast 2.3-million-tonne crop following year before output of 2.4 million. The IGC puts Colombia’s crop at an unchanged 200,000 tonnes, while Venezuela’s crop is forecast at 200,000 tonnes, up from 100,000. The region is forecast to produce 1.6 million tonnes of oats in 2014-15, up from 1.5 million the year before. Argentina’s crop is forecast at an unchanged 500,000 tonnes.


South America includes some of the world’s most important grain exporters. For 2014-15, the IGC puts Argentina’s exports of all grains at 28 million tonnes, a big jump from the previous year’s 17.3 million. Brazil’s total exports are forecast at 21.1 million tonnes, down from 24.1 million the year before.

The region is also a big importer, particularly as much of its export capacity stays on the continent. Total grain imports forecast for 2014-15 come to 26.8 million tonnes, down from 28.3 million. Brazil is the biggest importer, buying 7.6 million tonnes, down from 8.7 million, while Colombia’s imports are put at 6.2 million, down from 6.6.

The USDA attache reported on Brazil’s imports earlier this year.

“The United States exported 3.48 million tonnes to Brazil in 2013 – the highest in 30 years – due to Brazil’s demand for imported wheat after its traditional supplier, Argentina, was unable to meet this demand,” the report said. “Brazil was the second largest export market for U.S. wheat in 2013, after China.

“In 2013, U.S. wheat was able to enter the Brazilian market en masse, taking advantage of market conditions. With Argentina out of market, and a temporary tariff reduction in place, U.S. wheat was able to effectively meet the needs of Brazilian millers. In 2013, Brazil became the second largest market for U.S. wheat, just 500,000 tonnes behind China.”

Despite record global production, Argentina, which traditionally supplies most of Brazil’s wheat import demand, experienced the worst crop in a century, it explained.

“Argentina was forced to restrict exports to satisfy its domestic demand. With Argentina out as a supplier, Brazil temporarily reduced its Common External Tariff (TEC) for non-Mercosul countries from 10 to zero percent from April to December of 2013 to encourage imports.”

From Buenos Aires, the attaché agrees that Argentina’s wheat area is set to rise.

“There is a general consensus that wheat area will expand in MY2014-15,” an annual report on the grain sector said. “We estimate planted area at 4.2 million hectares, an increase from last year, but still very low compared to Argentina’s normal planted area of 6 million hectares. Production is forecast at 12 million tonnes, the highest of the past two crop seasons.”

Although there still persists great uncertainty on the marketing side, due to government policies which limit and control exports via quotas, there are a number of other factors which play in favor of an expanded area, the report said. “These are: a good crop last year, with good yields and quality; extremely high prices in the previous season (although nobody can expect such values, farmers have expectations prices will be good); good projected returns; in crop MY2013-14 wheat combined with second crop soybeans resulted in many cases the best economic alternative; the need of many farmers to have money at the end of the year to finance summer crops plantings; in most cases there are excellent levels of soil moisture which would guarantee a very good start; plenty availability of good quality seed; a drop in barley area which would be taken over by wheat; and the need of increased rotations due to the ever growing soybean area.”

For barley, the attaché in Buenos Aires reported a consensus that area will drop in 2014-15.

“We estimate area at 950,000 hectares, a 24% decrease,” it said. “Production is projected at 3.3 million tonnes. Barley area grew significantly in the past few seasons, primarily as an alternative for farmers to ‘run away’ from planting wheat which was, and continues to be, closely controlled by the government (making the price for the farmer lower than it should be).

“Before this shift began (MY2008-09), the area ranged between 500,000-700,000 hectares. In the past two crop seasons, many barley producers were disappointed with the quality and yields obtained. Many wheat producers who began to plant barley as an alternative had difficulties mastering the crop. Furthermore, the price of barley has fallen significantly from its parity with wheat, making wheat significantly more profitable (current price differential is +$25-35 per tonne).”

From Brasilia, attaché reports have covered increasing ideas on Brazil’s crop.

“2014-15 wheat production is increased to 6.3 million tonnes due to increased area in the tropical savannah (“cerrado”) biome,” a report dated June 27 said, pointing out that the government is encouraging expansion into that area. “The 2013-14 corn production is up from the previous estimate to 76 million tonnes on extended rains and better than expected yields.

“The states in the “cerrado” biome of the Center-West are expected to see a 17% increase in area from the previous year, though the area is still small in comparison to the main growing regions of the South and Southeast. Recent flooding and wet weather in the states of Rio Grande do Sul and Santa Catarina has slowed the planting process, which will delay the harvest into October/November.”

The attache in Santiago stressed the political importance of wheat in an annual report on the market there. “There are an estimated 46,000 producers, of which 87% plant less than 50 hectares and produce 22% of the total output of wheat; just over 40,000 are small farmers which are the so-called subsistence group with little or no alternative crops,” the report said. “A little over 550 farmers produce 50% of the wheat in Chile and around 5,000 are considered the medium-size producers.”

The attache in the Colombian capital Bogota reported the success of U.S. exporters there. “U.S. corn exports to Colombia are swiftly recovering the market against Southern Common Market (MERCOSUR) competitors,” a report said recently. “As of March 31, 2014, U.S. corn exports reached 1.7 million tonnes, or about 74% of the 2.3- million-tonne quota for 2014. The entire quota will likely be filled before August this year.”

Venezuela is reliant on imports. “Overall grain production continues to be held back due to control policies and insufficient agricultural inputs,” the attache in Caracas said. “This factor, combined with growing internal demand, has led to shortages on the local market, and therefore, trade opportunities. We expect imports of yellow corn, rice, and wheat to continue strong, based on domestic food demand, requirements of the animal feed industry, and a fall in domestic grain production.”

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.