Wheat production in Argentina, Brazil's main supplier, is expected to fall sharply and prices may rise, Brazilian wheat millers said. Argentine wheat output is seen at 13 to 14 million tonnes in 2005/06, down from 16.5 million in 2004/05, due to a smaller planted area.
The government has also forecast that Brazilian output will fall by more than 1 million tonnes to 4.77 million in 2005/06 due to a 14 percent reduction in the planted area.
"These factors suggest that wheat prices won't fall. It's a brighter price outlook for our wheat growers," Lawrence Pih, President of Moinho Pacifico, Brazil's biggest wheat miller.
He estimated Brazilian and Argentine wheat consumption at 16.5 million tonnes in 2005/06.
Antenor Barros Leal, Director of Grupo Predileto, one of Brazil's largest wheat milling groups, said that Argentine crop data should be treated cautiously and prices were unlikely to rise significantly.
"I don't see scope for higher prices even with slightly lower output in Brazil and Argentina...the Brazilian government and private sector have large stocks," he said, adding that world supplies are plentiful. Brazilian government stocks are put at 760,000 tonnes.
A veteran Brazilian wheat trader said a smaller Argentine wheat harvest, strong Brazilian demand and possible weather problems for US grain crops pointed to a slightly firmer price scenario.
The trader forecast Argentine wheat being delivered to Brazilian mills at 387 reais per tonne in November, compared with a current inter-harvest price of 432 reais per tonne. Brazil is due to harvest its wheat crop in September.
Wheat from Brazil's Parana and Rio Grande do Sul states is now quoted at 380 reais and 360 reais per tonne respectively.