Shortage of high-quality wheat and weak real increase Brazil’s import dependence

Brazil could enter 2027 with its highest dependence on imported wheat in two decades due to declining domestic production and deteriorating crop quality. According to Safras & Mercado, wheat production in 2026 is forecast at around 5.09 mln tons, down 37% from 8.12 mln tons a year earlier. Meanwhile, Brazil’s National Supply Company (Conab) estimates the harvest at 5.7 mln tons, representing a 27.2% year-on-year decline. Against this backdrop, Safras & Mercado forecasts record wheat and flour imports of 9.75 mln tons in the 2026/27 marketing year, compared with 7.8 mln tons in 2006/07. Conab’s official import forecast is significantly lower at 7.1 mln tons.

The smaller harvest is accompanied by a shortage of milling-quality wheat, creating additional challenges for Brazilian flour mills. In Paraná, one of the country’s main wheat-producing states, output could fall by 34% to 1.9 mln tons due to reduced planting areas and excessive rainfall during harvest. Heavy rains also damaged grain quality, widening price differences between wheat grades. In mid-October, premium wheat with a test weight of PH 78 was priced at up to R$1,780/t, while lower-quality wheat with PH 73 traded at approximately R$1,250/t. As a result, the quality premium exceeded R$500/t.

According to Safras & Mercado, Brazil’s ending wheat stocks could decline to 573 thsd tons by August 2027, equivalent to just 4.4% of domestic consumption — the lowest stocks-to-use ratio since the 2015/16 marketing year. Meanwhile, around 900 thsd tons of wheat are expected to be allocated to non-milling uses, including animal feed and bioethanol production. Using lower-quality grain in these sectors will not resolve the supply challenges facing the flour milling industry, whose annual wheat requirements are estimated at approximately 13 mln tons.

Argentina could become the main source of additional wheat supplies for Brazil, with one of its largest harvests in 17 years expected. According to the Rosario Board of Trade, wheat production in the 2026/27 marketing year could reach 23.8 mln tons, while the Buenos Aires Grain Exchange forecasts 23.4 mln tons and USDA estimates output at 23 mln tons. The arrival of Argentina’s new wheat crop from December could create favorable purchasing conditions in the first quarter of 2027, supported by ample supplies and competition among exporters.

Meanwhile, the weakening Brazilian real remains a key risk for wheat importers. As of November 3, the US dollar was trading at approximately R$5.49, its highest level since the beginning of the year. According to analysts, with imported wheat priced at $250/t, every R$0.10 increase in the dollar exchange rate raises procurement costs for Brazilian flour mills by R$25/t. Even if global wheat prices remain relatively stable, currency fluctuations could significantly increase import costs. In 2027, the market will also be affected by logistical risks in the Black Sea region and growing competition for port capacity in Brazil as soybean exports accelerate.

Tags: Brazil, wheat