exportações de trigo (wheat exports Argentina)
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War brings disarray to Brazilian wheat mills

May, 05, 2023 Posted by Lucas Lorimer

Week 202321

Brazilian wheat mills ended 2022 with a net margin (net profit divided by revenue) on average 20% lower than the previous year. The companies suffered mainly from the strong increase in production costs and grain prices, which hit record highs soon after the beginning of the war in Ukraine, coupled with the tightening of stocks. The financial loss was stronger among medium-sized companies, which have revenues between R$ 80 million and R$ 600 million, according to TCP Partners, an investment boutique that tracks more than 40 sectors of the economy.

Brazil had 144 mills in operation last year, according to a survey by the Brazilian Association of the Wheat Industry (Abitrigo); a year earlier, there were 193. Of the 144, about 30% have an annual turnover of more than R$ 130 million.

Two years ago, Ricardo Jacomassi, chief economist and responsible for TCP’s market strategy, prepared a study in which he projected a consolidation of the sector and an average increase in revenue of 6.6% per year, to something close to R$ 124 billion in 2025. However, covid-19 and the war changed the picture. “Obviously, we did not expect these occurrences, and that delayed the consolidations,” he says. “Revenues grew with the increase in product prices, but without an increase in profits.

But, at the moment, it seems that the buying appetite is back. Jacomassi says that there is, for example, a large European food additives group looking for niche mills, which make only premium bakery products.

Please find below the volume of wheat (hs 1001) exported through Brazilian ports between Jan 2022 and Feb 2023. The data is from DataLiner.

Wheat exports from Brazil | Jan 2022 – Feb 2023 | WTMT

Source: DataLiner (click here to request a demo)

For 2023, the expectation is an improvement in margins, due to the effects of the war already being known and stocks being a little fuller. Although the Argentine harvest was half of what was expected, the estimate is that Brazilian production will break records and exceed 11 million tons. “Only two issues bother us now: the dry weather in the US that may reduce their crop and increase prices, and the high cost of money in Brazil, what with interest rates,” summarizes Jacomassi.

From the producer’s point of view, the 2023 harvest, which is currently in its beginning, seems to be more profitable. “We ended 2022/23 as the most expensive season in history due to high input prices. Now things have stabilized, but it is still early to say how the weather will be, what the productivity will be, and, mainly, if the sale prices will be remunerative,” says Hamiton Jardim, president of the Wheat Commission of the Agriculture Federation of the State of Rio Grande do Sul (Farsul).

The average cost of production in 2022/23 was R$ 4.5 thousand per hectare. This year, taking into account the current prices of inputs, it should stay at R$ 3.8 thousand. At present, with the wheat in Rio Grande do Sul at R$ 74 a bag on average, the producer has to harvest more than 3.6 thousand kilos per hectare to meet the outlay. Last season, when productivity in the state was at record numbers, the average was 3.9 thousand kilos per hectare.

Source: Valor Econômico

To read the original article, access: https://valor.globo.com/agronegocios/noticia/2023/05/05/guerra-afeta-margens-de-moinhos-de-trigo-no-pais.ghtml

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