Uruguay is a successful exporter of grains and oilseeds, particularly rice and soybeans. The rice mainly goes to neighboring countries, while China is the major destination for Uruguay’s soybeans. A severe drought in 2017-18 cut production of grains and oilseeds sharply, but a recovery to more normal levels is expected for 2018-19.
The International Grains Council (IGC) projects Uruguay’s total wheat production at 600,000 tonnes in 2018-19, compared with 400,000 the year before. It is set to import 300,000 tonnes of corn in 2018-19, compared with 400,000 the previous year.
The country is expected to produce an unchanged 900,000 tonnes of rice in 2018-19. Rice exports are forecast at 800,000 tonnes, down from 900,000 the year before.
The IGC projects Uruguay’s soybean production in 2018-19 at 3 million tonnes, up from 1.7 million the year before. In 2017-18 the IGC puts Uruguay’s exports of soybeans to China at 600,000 tonnes.
In an annual report on the grains sector dated April 25, the USDA attaché in Uruguay also forecast wheat production at 600,000 tonnes in 2018-19, compared with 440,000 tonnes the year before, noting that a stable harvested area of 200,000 hectares is significantly lower than the historical average.
“Despite strong future prices ($190 to $200 per tonne for good quality wheat, December 2018) returns are tight given average yields,” the report said. “Analysts estimate that wheat production costs in 2018-19, close to $600 per hectare, will require roughly 3.5 tonnes per hectare to breakeven.”
The report noted that increasingly soil quality problems mean that some farmers will plant winter wheat as a soybean rotation option for weed suppression and erosion control. The report also cited local analysts’ prediction that some small inefficient input suppliers and wheat farmers might go out of business after the poor wheat crop of 2017 and drought-affected maize and soybean seasons in 2018.
“Input suppliers indicate that financing for the next crop will continue with somewhat stricter conditions,” the report said.
The attaché also noted that malting companies spurred interest in barley for 2018-19 by offering contracts to growers, reckoning that the companies would likely contract 160,000 hectares, with a further 10,000 grown for feed purposes.
“Stronger prices, higher yields and an earlier harvest (around two weeks), as compared to wheat, attract farmers in the southwestern core area due to significant advantages when double cropping with soybeans,” the report said. “Additional cost incentives include the close proximity of malting plants to the production area that lower transportation costs and the provision of most inputs (seeds, fertilizers…) by the malting companies.”
Wheat and flour milling
The report puts wheat consumption in 2018-19 at an unchanged 500,000 tonnes, noting that “flour consumption remains quite stable year after year.”
“The use of wheat in animal feed is on the rise as lower prices increase its consideration as an alternative feed ingredient,” the IGC noted in the report.
It cited local industry as saying that feed lots consumed some 30,000 tonnes of wheat in 2016-17, but that figure could fall to 10,000 tonnes in 2017-18. Meanwhile, 2018-19 wheat exports were put at 100,000 tonnes, slightly higher than in the previous year, “due to an expected larger supply, destined primarily for Brazil.”
In the 2017 version of the annual report, the attaché put the number of flour mills in Uruguay at “roughly 15,” with three accounting for more than 70% of the market.
“There is significant unused capacity in the sector,” the report said.
Corn demand rising
The USDA attaché’s forecast for corn production in 2018-19 was 420,000 tonnes, up from 200,000 tonnes the previous, drought-stricken year. Corn usage in 2018-19 was put at 860,000 tonnes, up from 850,000 tonnes in the previous year.
“The trend of the past few years shows a small but constant increase in corn demand,” the report said. “The dairy sector is the leading consumer of corn in Uruguay, followed by the poultry industry and feedlots.”
Corn also goes to feed manufacturers, ethanol plants, and exporters of live cattle to Turkey and the Middle East. Uruguay does not usually export corn. The major source of its imports, according to the attaché, is Paraguay. Corn is shipped in containers by truck.
For sorghum, the attaché forecasts production of 210,000 tonnes in 2018-19, increasing from 120,000 tonnes in 2017-18.
“Sorghum in Uruguay is often planted in poorer soils using low technology,” the report said. “Alur, a national oil company (with a biofuels division), has historically been a principal buyer for use in their plant in Paysandú to produce ethanol under the local mandate.”
Other users of sorghum are the dairy sector and feedlot operations.
“Uruguay has practically no exports nor imports of sorghum,” the report said.
The attaché forecast 2018-19 rice production at 1.22 million tonnes (rough basis), compared with 1.28 million the previous year, with area projected down by about 6%.
“Contacts indicate that in the past three years rice prices dropped about 25% in dollar terms while production costs only 12%,” the report said. “Returns are very tight (in the best of the cases) and farmers continue to accumulate debt.”
The report foresees a fall in area as “less-efficient producers exit the sector.”
“High rice inventory in the region, especially Brazil, keeps downward pressure on rice prices in the southern corn-producing countries that squeezes producer returns,” the report said.
It put consumption of rice in the country at about 60,000 tonnes in 2017-18, roughly the same as previous years.
“Per capita consumption is estimated at 12 to 13 kilos of white rice, low compared to other countries in Central/South America,” the report said. “The quality of Uruguayan rice is considered to be one of the world’s best with a very uniform grain.”
Uruguay exported 1.014 million tonnes of rice to over 50 markets, the attaché said.
“Brazil was the No. 1 market for Uruguayan rice, followed by Peru, Mexico and Iraq,” the report said.
Soybean exports increase
Agreeing with the IGC, the attaché’s annual report on the oilseeds sector put 2018-19 soybean production at 3 million tonnes, up from 1.7 million the year before. Soybean exports are expected to rise to 2.9 million tonnes in 2018-19, up from 1.63 million the year before.
The soybean crush is expected to rise to 80,000 tonnes in 2018-19, up from 60,000 the year before, as a result of the increased harvest.
“Soybean crush is not expected to grow in any significant way as the country’s primary biodiesel blender, Alcohols of Uruguay (Alur in Spanish), plans to utilize more canola as a feedstock for its operations,” the attaché said. “Alur recently announced plans to increase its canola demand by providing attractive price contracts to local producers.”
The attaché’s local contacts put the canola (rapeseed) area at around 30,000 to 40,000 hectares.
More than 90% of Uruguay’s soybean complex exports are in the form of soybeans.
“Prospects are low that Uruguay will expand the processing of soybeans for domestic use and exports, due to high upstart and operating costs of crush operations,” the report said. “China encompasses the majority of Uruguay’s export market share with over 82%. Other major destinations include the European Union (5%) and markets in North Africa and Southeast Asia.”
The report also noted that Argentina has become a significant importer of soybeans from Uruguay, using the additional supplies to increase utilization of excess crush capacity.
“Uruguay’s soybean varieties are all derived from biotechnology,” the attaché’s annual report said. “The rapid and successful adaptation of this technology has contributed to higher yields which have increased on average by 5% per annum.”