Climate change impacts global wheat production

On the afternoon of Thursday, November 05th, the Brazilian Wheat Industry Association (Abitrigo) brought together representatives from the global wheat sector in the “International Harvest 20/21” webinar. The online event, which was opened by the executive president of Abitrigo, Rubens Barbosa, brought to light an overview of the prospects for the harvest, quality, volume, stocks and price behavior in Argentina, Canada, the United States, Paraguay, Russia, the European Union and Uruguay.

The moderation was due to the director of Grande Moinho Cearense, Adriano Campos, who highlighted that 2020 has been a paradoxical year, with high prices in all countries and a record harvest in the world. According to him, with the high dollar, the mills had substantial increases in production costs and the transfer to flour prices should occur soon.

“We had a harvest of 773 million tons: the largest in world history. The sector expected that prices would be lower as a result and that was not what we had. What happened were high prices in all countries. The scenario showed Russia as a price maker. Argentina, at this same time last year, was selling wheat at US$ 180/ton and today they are talking about US$ 250, an increase of 36% compared to 2019”, he explained.

Argentina

Producers are happy, but the industry is not so happy. This is what the president of the Camara Arbitral de la Bolsa de Cereales, Javier Bujan, mentioned about the rise in wheat prices with an increase of 12% over the FOB value so far.

Furthermore, Argentine production may be compromised by strong heat waves, lack of rain and incidence of frost. The areas most affected by the drought in Argentina were the regions of Córdoba and Santa Fé. The expectation for harvest in June was 20,5 million tons. In September, the calculation was redone and reached 18 million tons. However, this value will probably be even lower and Argentina should reach 16,8 million tons of wheat produced in 2020.

“There was also a reduction in area by 165 thousand hectares, not due to abandonment but rather due to drought. The harvest so far only covers 6,1% of the harvested area and is the area most affected by the drought. We will have to wait the next 45 days to really know how we will reach the end of the harvest,” he said.

“We knew that droughts would exist, but not that they would be so severe. The heat waves ended up causing even more harm, unfortunately the rains arrived late and yield and product losses are inevitable”, he lamented.

Canada

The North American country, in 2020, recorded an excellent harvest in terms of volume and quality, according to the director of Market Analysis and Commercial Policy at Cereals Canada, a company that represents the entire sector chain in the country, Daniel Ramage.

Producers have already finished harvesting and with just a 2% increase in planted area, production achieved a 45% higher yield, considered above the average of the last ten years, with an average of 3,55 tons harvested per hectare and a total volume of 764 millions of tons. Of this amount, the export portion is considered small by the expert, as only 25 million tons will be sold to other countries.

 “We had good soil moisture levels and the rains came at the right time, providing good conditions for the beginning of planting. At harvest, temperatures just above 30 degrees favored us and also the low incidence of rain during this period was essential,” he commented.

United States

Wheat exports from the United States to South America, between January and October this year, reached 2,25 million tons, with Brazil having a 32% share. US wheat exports to Brazil increased by 91% compared to last year, jumping from 376 thousand tons to 721 thousand tons shipped. The numbers were presented by the director of US Wheat Associates Sudamerica, Miguel Galdos. According to him, for 2021, the outlook is positive and should register an 84% growth in the volume exported to Brazil.

“This was the highest volume in the last four years. We are very grateful for the Brazilian milling industry and we have seen a constant increase in this market, mainly due to the drought situation that not only affects Argentina, but all of South America and can already be considered the biggest drought in the last 18 years” , he commented.

The low level of soil moisture is not exclusive to South America. The director signaled that there is also a concern on the part of North American producers that the moisture is not sufficient to germinate the wheat expected to be harvested in 2021.

Paraguay

The strong drought and late frosts also compromised the quality of Paraguayan wheat. This was presented by the president of the Union of Cooperatives of Paraguay – UNEXPA S.A., Ruben Zoz.

Estimates for 2021 are 400 thousand hectares of planted area, with production estimated at 2,95 tons/hectare, reaching a total of 1,18 million tons, with Brazil being responsible for purchasing 222 thousand tons. Regarding prices, the producer should receive US$ 225/ton.

“Paraguay had a 26% growth in wheat cultivated area between 2005 and 2020. However, in the last five years, we reduced the area for cultivation by 12%. For 2021, of our total production, we should have a surplus of 580 thousand tons for export, but this will be under favorable weather conditions”, he bet.

“Our focus is on producing quality improving wheat and we are encouraging producers so that they can bring varieties that meet the demands of mills and bakers, which result in a product that the end consumer wants to purchase”, he added.

Russia

Russia fulfilled its promise to bring differentiated quality and competitive prices to Brazilian mills. The first ships arrived in the last two years and, in 2020, the country should complete the delivery of 235 thousand tons. The information was provided by SODRUGESTVO's Head Wheat, Douglas Araújo.

“This campaign started earlier with shipments in July and October. We still have eight ships in progress, which are in the final stretch of deliveries. What favored it were prices below U$200 and Brazilian mills were able to do good business,” he commented.

With extensive areas available, vocation for winter crops and established logistical corridors, Russia has the potential to further leverage and extend grain export production. For 2021, 83 million tons are expected, of which 39 million are destined for other countries, making Russia the global leader in wheat exports.

Climate issues also worry Russians, as this year saw the biggest water deficit since the end of the 90s. “It rained, but maybe not enough. So the weather could affect the next harvest”, he indicated.

European Union

Europe's harvest suffered a decline this year, mainly in France, Germany, England and Bulgaria. This was due to the competitiveness of Lithuania and the Baltic countries. According to the trader at Grain Merchant Wheat - Soufflet Négoce, Victor Buczynski, exports fell by more than 10 million tons in 2020 in the European Union.

“The sowing area was also reduced and the climate impacted production, as the spring was dry and productivity fell as a result. This year, exports should reach 7 million tons on average,” he said.

For Europeans, this year has been special thanks to the arrival of a new client. With the closure of the American market, China started to buy French wheat, reaching 1,5 million tons so far, with the prospect of an increase of another 1 million tons.

Uruguay

Uruguay is at the end of its harvest and harvest numbers will be known in December. The expectation is that the country should reach 776 thousand tons of wheat harvested. This was one of the numbers presented in the webinar by the representative of the Ministry of Agriculture, Agriculture and Fisheries, Catalina Rava. According to her, for 2021, there should be a 2% reduction in production, with an estimated 760 thousand tons of grain.

“We must also reduce the sown area by 8%, with a surface of 217 thousand hectares. To date, our cultivation has excellent health status. The crops will achieve good germination, with an excellent grain filling stage and no disease problems, such as fusariosis, have been recorded”, he commented.

In terms of exports, Brazil regained its leading role in purchases and reached 240 thousand tons, being responsible for 82% of all Uruguayan wheat exports.

The Uruguayan producer should also celebrate the price paid. For the new 2020/2021 harvest, the expectation is U$203/ton, on average, which represents an increase of 19% more than what was received a year ago: U$171/ton.

For the next harvest, Uruguay expects good yields and good quality; However, what is of concern is the water deficit and the possibility of impacts from the La Niña climate effect. “Wheat has a longer cycle and is very susceptible to the consequences of drought,” he said.

The webinar “International Harvest 20/21” can be seen in full on the Abitrigo channel on link.