Despite a near doubling in domestic wheat production in 2003, Brazilian flour mills imported more wheat last year than in 2002, spending over $1 billion, millers and wheat specialists said.
Brazil, the world's No 1 wheat importer, purchased 6.58 million tonnes abroad in 2003, up slightly from 6.53 million the previous year, the Trade Ministry reported.
But producers harvested the biggest crop in 14 years.
Government officials say millers are squeezing domestic prices lower with imports and undermining government efforts to boost Brazil's wheat output, which is expected to rise this year.
Millers say they have long-term contracts to import wheat and cannot accommodate large swings in domestic output.
"The crop put out 2.9 million tonnes in 2002 to 5.5 million tonnes in 2003," Antenor de Barros Leal, director of Brazil's No 3 wheat milling group Predileto, told Reuters. "It's not possible to trust in what is untrustworthy."
Brazil's wheat growing region is often subject to drought, frost and late rains - sometimes all in the same year as in 2002 - that can devastate national output. This is one reason is not as popular among Brazil's farmers who are major world producers of crops such as soybeans, corn, coffee, sugar and oranges.
Another problem with Brazil's domestic wheat production is the exorbitant cost of transporting it to market by truck.
"It is cheaper for a mill in Rio de Janeiro to bring in wheat from Argentina by ship than wheat from Parana state by truck," Leal said. If past patterns prevail, transportation costs will rise as the estimated 60-million-tonne soybean and 45-million-tonne corn harvests pick up steam in the coming months.
"Freight prices should jump from 60 reais a tonne to about 90 reais at the soy harvest peak. It'll be hard for Sao Paulo to buy wheat from Parana and Rio Grande do Sul," said Lawrence Pih, director of the Moinho Pacifico mill in Santos, Sao Paulo.
Another problem with Brazil's domestic wheat production is that it's concentrated in the two southern states of Rio Grande do Sul and Parana.
"It's far from the region of consumption," Leal said.
But Pih said the big wheat harvest of 2003 only began in August and would likely have a greater effect on the total volume of imports in 2004.
"Only a tad over half the crop has been sold," Pih said.
Marcio Augusto da Silva, responsible for the wheat department at the Agriculture Ministry's crop supply agency (Conab), said local mills could have taken better advantage of the domestic crop.
"Some mills, well aware we would have a good crop, closed new contracts to import and ended up well stocked during the period when the local crop is sold," Silva said. "There is a game among local mills to force the local price down."
Despite the unfavourable domestic market, Silva said he expected producers to expand the area planted to wheat in 2004. Conab agents will start their next survey of the national grain crops this week.
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