Why Canadian wheat has not been to the Brazilian market?
By Gabriel Ferreira
The Argentine planting was far short of its potential in the 2013 crop losses from drought in the American wheat crop in 2014, local prices increased to U.S. $ 360/ton FOB in early May, but the Canadian Wheat, why has not come into the Brazilian market ?
The Argentine planting was far short of its potential in the 2013 crop losses from drought in the American wheat crop in 2014, local prices increased to U.S. $ 360/ton FOB in early May, but the Canadian Wheat, why has not come into the Brazilian market ? That’s what we try to understand in our analysis today, the eve of the CAMEX meeting that will decide whether the wheat will be removed TEC or not.
According to market players in importing wheat consulted today, currently the main issue not bring bring Canadian wheat, but the U.S. is wheat prices and freight difference. At the moment FOB St. Lawrence between $ 325-340/ton and FOB Gulf of Mexico right in the middle of this range. The difference in freight between the ports of the Gulf and southern Canada should reach U.S. $ 10/ton.
Soon both are equal in relation to prices of arrival at Brazilian ports, but the Canadian wheat has not come for reasons inherent in mills and Brazilian consumers. The market observations and reports from vendors mentioned the following causes:
1) Classification of Canadian wheat: Canadian wheat classes available are not suitable for use in flour produced here in Brazil. Especially in baking three of respondents stressed that Canadian wheat does this kind of flour alone and it brings some inconvenience cited below.
It is worth mentioning that as in the case of the Gaucho wheat, it is not calling it a “bad” or “good” wheat, not only meets the needs and habits of Brazilian consumers;
2) Workability of the wheat in mills: Brazilian buyers, especially in the South, complain about the difficulty of regulating machinery to grind Canadian wheat as well as increased wear of machinery;There are also reports on the difficulty in correctly dosing of blends with other wheats. At this point, the U.S. is much more acceptable, given the fact their use from North to South of the country in the current harvest, the absence of Argentine wheat;
3) Logistics: With a very large crop in 2013, there were problems flow from production to Canadian ports without associated to it, the port that has the best condition for export to Brazil spends at least three months of the year unable to load the freezing of its waters. This limited until at least March sending more Canadian wheat to Brazil;
4) Quality of the last harvest: With a record production, estimated at 37.5 million tonnes in 2013/14, productivity curtailed somewhat the protein quality of Canadian wheat. Somehow, excessive rainfall in the country also affected the qualitative parameters, and we tried to bring a wheat type 2 extremely cheap in early Brazilian harvest and that was not very well accepted by all their buyers, so much so that not again be sought by Brazilian mills.
Ok, we have these limitations, but new purchases can be made?
In our opinion and our respondents, obviously it all depends on the removal or not of TEC, which would bring greater attractiveness to Canadian product. Another point is the behavior of the U.S. wheat prices, with current losses that can work with an award in relation to other sources, depending on the threshold level to encourage new purchases until the arrival of the new Argentine crop.
But given the above, it is clear that Canadian wheat would add to the mixtures and not to replace American and Argentine wheat production of breadmaking flour.
Source: Gabriel Ferreira “Por quê o trigo canadense não tem vindo ao mercado brasileiro?“ [translated from the portuguese version on 2014-05-21] http://www.afnews.com.br/trigo-brasil/por-que-o-trigo-canadense-nao-tem-vindo-ao-mercado-brasileiro-.html
Note: U.S HRW CNF Brazil will fetch $400/MT this wk. Arg wheat is in the $350/MT zone for Brazil but they complaint about the quality. With the %10 fob tariff imposed on non-Mercosur countries, it’s not cheap but some seeking to load brazilian beans bound for the U.S., the arb is open. From Wheat Trader Sean Linstead, Canada’s exports to Brazil rose from 16,500mt to 342,300mt y-t-y, still the U.S. dominates with 3.48mmt y-t-d.