Brazil will double its wheat-import quota for purchases outside a regional free trade bloc and cut to zero its tariff on cotton imports to help industries expected to be hurt by high prices and low stocks. The country's foreign trade commission (Camex) on Tuesday bumped the wheat quota up to 2 million tonnes from 1 million tonnes. The zero tariff on cotton applies to purchases of up to 80,000 tonnes. Both decisions take effect on July 31.
Prices of wheat, cotton and other crops generally rise as stocks fall in the inter-harvest period that comes with the advent of the Southern Hemisphere winter beginning in June. Production from farms in the Mercosur free trade bloc, comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela, is below normal this year, raising concerns stocks will be especially hard hit. In the first eight days of April the price of wheat in Brazil was 50 percent above the average April price a year ago, according to a report from the University of Sao Paulo's Advanced Center for Applied Economic Studies (Cepea).
On Monday wheat traded at $7.125 a bushel in Chicago, up around 7 percent from a week earlier. The quota increase comes a month after Camex cut the tariff on wheat to zero from 10 percent with the warning that it could raise the quota if Argentine production appeared to be insufficient to cover Brazil's needs. The wheat harvest in Argentina, Brazil's main supplier, fell 29 percent to 11 million tonnes in 2013 compared with 15.5 million in 2012, according to the US Department of Agriculture (USDA).