SAO PAULO, BRAZIL — Brazil’s 2017-18 wheat production is forecast at 4.3 million tonnes, down sharply from the previous estimate due to larger-than-expected losses from drought and frost conditions during critical development stages of the crop, according to a Jan. 30 Global Agricultural Information Network (GAIN) report from the Foreign Agricultural Service of the U.S. Department of Agriculture (USDA).

If realized, it will be a 36% decline from the country’s 2016-17 wheat output of 6.73 million tonnes, the report said.

Wheat imports for 2017-18 are forecast at an increased level of 8 million tonnes, reflecting the decrease in domestic production.

“Brazil generally imports at least half of its domestic wheat demand, with most imports being duty-free purchases from Mercosul-partner Argentina,” the GAIN report said. “However, in December 2017, the Brazilian Ministry of Agriculture published a new set of regulations to allow the importation of Russian wheat for the first time. Russia wheat had been banned for phytosanitary reasons, but the new regulation allows imports into Brazil’s northeast region for mills located close to ports (in an effort to limit the spread of any potential disease risk).”

The report said that despite the comparatively higher transportation costs, Russian wheat might be competitive in Brazil due to the large supplies pouring into the international market. It noted that Brazilian government trade statistics don’t yet show any wheat imports from Russia.

Brazil’s 2017-18 wheat exports are lowered slightly to 600,000 tonnes to reflect tighter domestic supplies, the report said.