Paraguay is a small but important exporter of grains and oilseeds, primarily to its neighbors Brazil and Argentina. It supplies markets further afield, but its landlocked position in South America creates extra costs compared to its competitors, with river transport used to get grain to the coastal ports.
The International Grains Council (IGC) forecasts Paraguay’s corn production in 2020-21 at 4.2 million tonnes, up from 3.8 million the year before. Corn exports are put at 2.7 million tonnes, compared with 2.8 million in 2019-20.
The IGC puts Paraguay’s soybean crop in 2020-21 at 10.5 million tonnes, up from 10 million the year before. Exports are forecast at 6.2 million tonnes, up from 6.1 million in 2019-20.
Wheat and flour milling
according to an attaché report on the grains sector published on April 17, Paraguay’s wheat production in 2020-21 is likely to be 1.275 million tonnes, up 21% on the previous season. Exports are put at 580,000 tonnes, up 220,000.
The attaché explained that wheat production will be the largest in six years “as land left uncultivated with second crop soybeans due to a late soybean harvest may be planted with a wheat cover crop for weed control.”
“Some moderate expansion may also take place in the primary wheat production area in southern Paraguay,” the attaché said. “Crop development may be impacted by reduced availability of chemical inputs due to sanitary controls on supply chain movements in response to COVID-19 concerns.
“In 2020-21, wheat domestic consumption is forecast at 670,000 tonnes, lower than the previous year as demand spikes during the COVID-19 crisis return to more normal levels in 2021. Retail outlets currently report strong demand for flour due to its low cost, versatility and long shelf life.”
Wheat flour consumption in Paraguay is historically consistent at approximately 60 kilos per capita, the attaché said.
Johnny Hildebrand, president of the Paraguayan milling industry association Capamol and chief executive officer of Hilagro Milling Co., told World Grain that there are 34 active mills in the country, with 22 members in the association.
“We now have a milling capacity of 1,250,000 tonnes a year (4,185 tonnes a day),” he said. “Milling is about 680,000 tonnes of wheat a year; that gives a capacity usage of 54%.
“At the time there is no imported flour in the market, and the yearly flour export in 2019 was 21,489 tonnes and in 2020 the projection is about 12,000 tonnes.”
He put wheat production in 2020 at around 950,000 tonnes on an area of 430,000 hectares.
“Brazil is expected to receive over 90% of exports, trucked primarily to the state of Paraná, and to a lesser extent, the states of Santa Catarina and Rio Grande do Sul,” the attaché said. “The remaining wheat exports, destined primarily to northeastern Brazil, Bolivia and Vietnam, an increasingly active export market since late 2018, will be barged via the Paraná River to the Port of Rosario in Argentina or the Port of Nueva Palmira in Uruguay for loading onto larger vessels.”
The attaché forecast 2020-21 wheat ending stocks at approximately 200,000 tonnes but said the final number will depend on total exports.
“According to industry sources, Paraguay’s typical range of ending stocks is between 150,000 and 200,000 tonnes,” the attaché said. “The milling industry rolls over 120,000 to 140,000 tonnes of ‘old’ wheat to blend with the new crop in the first four months of the marketing year with the remaining stocks held by town elevators, producers and farmers with saved seed.”
Rotating corn with soybeans, instead of double-cropping soybeans, is growing more common in Paraguay due to positive corn returns, which could see corn expansion continue an upward trend, the attaché said.
“Although the cost of producing corn, which ranges between $550 and $650 per hectare, is somewhat higher than soybeans, farmers can still gain $70 to $100 more per hectare with corn,” the attaché said.
The report explained that if the soybeans need to be sprayed against rust, the advantage of growing corn is ever greater.
“The replacement of zafrinha soybeans with corn is occurring primarily in the southeastern region of the country,” the report said. “However, sources report roughly 50,000 to 70,000 hectares of crops, much of it planted to corn, have also been established in the Chaco region in northern Paraguay.”
The attaché forecast corn consumption in 2020-21 at a record 1.68 million tonnes, on the assumption of an economic rebound in the animal feed and biofuel sectors following the COVID-19 pandemic.
“Paraguay’s bioethanol sector, consisting of two large and five smaller bioethanol plants, normally consumes about 1 million tonnes of corn, with the animal feed, seed and corn flour sectors consuming the balance,” the report said. “Although feed demand in the livestock sector has been on the rise, contacts indicate that much of that growth is being filled by dried distiller’s grains with solubles from Paraguay’s two large ethanol plants.”
Brazil is expected to receive about 50% of total corn exports, followed by South Korea, Chile and Uruguay, the report said.
“In the past five years, these four markets have accounted for approximately 80% of Paraguay’s corn exports,” the attaché said.
According to the USDA attaché, Paraguay’s rice production will reach a record 750.000 tonnes in 2020-21 with farmers encouraged to plant the crop by increasing profitability.
Consumption is expected to ease to 105,000 tonnes in 2020-21 after COVID-19 created strong demand in 2019-20.
“Once the pandemic is over, consumption is expected to return to normal levels,” the report said. “More than 20 companies market rice in Paraguay, including four to five large ones, with generally stable price and consumption conditions. Supermarkets, grocery stores and distributors are the most common sales channels.”
The report put rice exports in 2020-21 at 630,000 tonnes, on a milled basis, 3% down from 2019-20. In 2019 Brazil accounted for 74% of rice exports with other key markets, including Chile, the EU and Iraq.
“In an effort to expand its market opportunities as well as reduce its dependence on Brazil, Paraguay is seeking to increase exports to existing markets, such as Costa Rica, Guatemala, Panama, and Mexico, which opened to Paraguayan rice imports in 2017,” the report said. “Paraguay has increased its rice exports tenfold since calendar year 2008, displacing both Argentine and Uruguayan rice in the Brazilian market.”
While pork and poultry production has grown in recent years, further growth in domestic soybean consumption outside of industrial processing is limited by Paraguay’s location and structure of its livestock industry, the attaché said in an annual report on the sector dated April 10.
“Despite some recent investment in large-scale production, Paraguay’s pork and poultry demand is largely met by small-scale production by smallholder farmers and some imports from Brazil,” the attaché said. “More large-scale pork and poultry production would undermine this key source of income for rural residents. As Paraguay is landlocked, it must ship overland to Brazilian ports and competes in export markets with established Brazilian protein producers with shorter supply chains.”
In recent years, Argentina has become the principal destination for whole Paraguayan soybeans and this trend is expected to continue in 2020-21, the report said.
“The average protein content of Paraguayan soybeans is higher than Argentine beans, and the blending of Paraguayan beans allows Argentine crushers to meet protein specifications of their buyers,” the attaché said. “Paraguayan beans must be barged down the Paraguay or Paraná rivers to ports in Argentina or Uruguay to be loaded into ocean-going vessels.”
Chris Lyddon is World Grain’s European correspondent. He may be contacted at: firstname.lastname@example.org