Climate and geopolitical challenges reshape the outlook for the international wheat market

With the aim of providing strategic information about the global market and assisting in decision-making, the Brazilian Wheat Industry Association (Abitrigo) held the Webinar “International Wheat Harvest 2024” this week. During the broadcast, Abitrigo superintendent Eduardo Assêncio highlighted the difficulties faced by the sector in 2024, highlighting the crop failure in the South of Brazil and the challenges brought by geopolitics. "I hope the scenario stabilizes from 2025 onwards, providing a more favorable environment for the sector", he summarized.

The moderator was Pedro Sampaio, Director of Supplies at J. Macêdo, who also addressed the growing complexity of the global wheat market. According to him, factors such as the simultaneous occurrence of two wars and extreme weather are making it increasingly difficult to predict market movements. “Russia still dominates the wheat market, but Brazil has become an exporter of this product, which adds new layers of complexity to domestic pricing, as the country becomes more dependent on global dynamics,” he concluded.

USA: Optimistic outlook for next harvest

The Regional Director of US Wheat Associates, Miguel Galdos, reinforced the strong commercial relationship between the two countries in the sector. "Over the past 45 years, the US has maintained uninterrupted exports to Brazil, with volumes ranging from one ship to three million tons, depending on demand," said Galdos.

The US Department of Agriculture (USDA), according to him, estimates a production of 53,7 million tons for the 2024/2025 harvest, surpassing the 49,1 million of the previous season. “This significant increase is the result of better yields, provided by favorable weather conditions and the development of new varieties,” he said, highlighting the role of North American universities in the development of varieties that combine high productivity and quality.

Regarding exports, forecasts are optimistic. The estimate involves an increase from 19,2 million tons, recorded in 2023/2024, to 22,5 million tons in 2024/2025. Galdos also highlighted the growing participation of the Red Spring classification in the Americas. "Soft Red is well known in Brazil, but we are seeing an increase in the entry of Red Spring, especially throughout the Americas," explained the director, adding that quality will continue to be a main focus of wheat production in the United States.

Paraguay: increase in exports to Brazil

The External Advisor of the Paraguayan company Unexpa, Guido Vera, presented a positive outlook on the Paraguayan harvest in 2024/2025, with an estimated planting area of ​​390 thousand hectares. "Despite the adverse weather conditions last year, mainly for seed production, we observed a surprising growth in the adoption of wheat, especially in the Chaco region, where soybeans traditionally dominate," said Vera. He also mentioned the strong genetic connection between Paraguayan and Brazilian wheat varieties, which facilitates the product's access to the Brazilian market.

Vera mentioned that this year's production exceeded expectations, reaching 1,2 million tons of wheat, with domestic consumption estimated at 650 thousand tons and 100 thousand tons destined for domestic use of lower quality. "This leaves us with an export surplus of 400 thousand tons, a significantly higher amount compared to previous years," said the advisor. Yield was also significant, with an average of 3 thousand kilos per hectare, surpassing the 2,1 thousand kilos per hectare recorded in the previous harvest.

Brazil continues to be the main destination for Paraguayan wheat, and exports have already increased by 100 tons since September, driven by climate problems in Paraná. The advisor revealed that the future opening of the new bridge between Presidente Franco, in Paraguay, and Foz do Iguaçu, in Brazil, will facilitate the flow of trade by trucks between the two countries, reinforcing the importance of Brazil as a trading partner.

Argentina: significant sales enable market recovery

Wheat Cultivation Analyst at the Cereal Exchange, Daniela Venturino, presented positive figures for Argentine international trade. "3,28 million tons of wheat from this new cycle have already been sold, which represents an increase of 93% compared to the 2023/2024 harvest," she announced. However, she warned that, despite the growth compared to the previous cycle, the volume is 37% lower than the average of the last five harvests.

Daniela drew attention to the fact that, to date, these sales represent 17% of expected production, an increase of 6 percentage points (pp) compared to the previous cycle. Even so, the value is 13 pp below the average of the last five years, indicating that there is room for new negotiations. "Sales are progressing quickly, but we are still below the historical average," the analyst pointed out.

Regarding exports, Argentina already has 11,95 million tons scheduled for sale, with export operations scheduled to begin in December. This movement, Daniela added, is crucial for the country, which continues to be an important supplier of wheat in South America, with Brazil as one of its main purchasing markets.

Uruguay: climate could impact productivity and exports

The coordinator of the Agroindustrial Chains Area of ​​the Uruguayan Ministry of Agriculture, Catalina Rava, pointed out a reduction in wheat production compared to the previous year. “We estimate a planted area of ​​340 thousand hectares, a decrease of 3% compared to the previous harvest, and a projected production of 1,4 million tons, which represents a reduction of 19% when compared to the 1,7 million tons harvested in 2023/2024”, she said. She highlighted that the productivity record of the previous cycle, with more than 5 thousand kilos per hectare, will not be maintained this year, with a yield of 4,2 thousand kg/hectare being expected.

Regarding market behavior, Catalina commented that, even with the drop in wheat prices, Uruguay managed to maintain a significant planted area, even in comparison with other crops. “In Uruguay, wheat is not transgenic and competes with other crops for planted area. The drop in prices allowed both wheat and barley to maintain a good sowing area,” she highlighted. However, weather conditions are a cause for concern. “The lack of rain has been a problem. Forecasts indicate that the next three months will have below-normal rainfall, which could further affect productivity,” she added.

In terms of exports, Uruguay recorded positive figures in the commercial cycle from November 2023 to October 2024, with shipments of 1,4 million tons of wheat, double the volume in the previous cycle (700 thousand tons). "Brazil represents 54% of the total we export," Catalina said.

Black Sea: Aggressive pricing results in trade restrictions

Louis Dreyfus Company (LDC) executive Guillermo Benedit presented a challenging outlook for the 2024/2025 harvest in the Black Sea region. Russian exports have started aggressively, reaching levels close to the previous year’s record. “In the 2023/2024 cycle, Russia exported around 55 million tons of wheat, and for 2024/2025 the estimate is 44 million tons,” explained Benedit, highlighting that, despite a drop of 11 million tons, shipments remain strong, with 5,5 million tons being exported per month between August and October.

However, this Russian aggressiveness in the international market has had consequences. Benedit mentioned rumors of a possible restriction on the country's exports, due to the high volume exported at low prices. “The Union of Russian Grain Exporters warned about this intense pace and very low prices. One of the ways to limit these exports would be through technical barriers,” commented the executive, reinforcing that there are signs that these restrictions have already begun, with reports of phytosanitary problems on some vessels of new exporters, suggesting the beginning of control measures.

In Ukraine, the impact of the war continues to hamper export logistics. “With the constant bombing of the terminals at the port of Odessa, the country may be forced to find new logistics routes, increasing costs and export times,” Benedit said. Despite the challenges of the war, the country’s production conditions remain favorable, with the sowing rate of winter wheat slightly higher than the previous year (59% versus 54%). However, the conflict has caused the area planted in Ukraine to fall to 4 million hectares, a drastic reduction compared to the 100 million hectares before the war.