Brazil unveils plan to subsidize wheat trades

The Brazilian government has allocated 400 million reais ($79 million) to subsidize wheat trades from the 2023/2024 crop year in a bid to shore up prices, according to a statement.

History shows that when you launch (such a program), the market heats up,” Agriculture Minister Carlos Favaro said in the statement as he sought to highlight the importance of boosting Brazil’s wheat marketplace.

The government set 87.77 reais ($17.36) per 60-kg bag as the minimum price for “type 1 loaf wheat” in the program, which is about 44% above current domestic prices.

The plan is to guarantee trades at such a price level using an auction mechanism in which growers, wheat millers and traders can participate, the government said.

For StoneX’s wheat risk manager, Jonathan Pinheiro, the money allocated in the program could potentially spur commercialization of about 1 million tons of wheat.

The government has used subsidy programs before to ensure farmers receive a minimum income from their corn and wheat harvests when prices are low. But experts say such an initiative, used the last time in 2017 to bolster wheat trades, can also make the local product more competitive in global markets, which could draw criticism from rival exporters.

In a written statement, Rubens Barbosa, president of Brazilian wheat millers lobby Abitrigo, said the government aims to support increasing wheat production by guaranteeing minimum prices for growers.

“It will still be implemented. There will be no immediate impact on the market,” Barbosa said.
One southern farm cooperative welcomed subsidies, as they could benefit Brazilian wheat exporters and provide much needed market liquidity, especially for good quality wheat.

According to crop agency Conab, Brazil will produce some 10.4 million tons of wheat in the 2023/24 cycle. Although Brazil’s wheat area and output have been growing, the country still relies on imports for part of its domestic needs.

Through August, Brazil imported 1.6 million metric tons from Argentina, a traditional supplier. It also imported almost 500,000 tons from Russia, Abitrigo data shows.

Tags: Brazil, wheat, subsidize