Brazil’s tariff-free wheat import quota to be implemented in November

SAO PAULO, (Reuters) – Brazil plans to introduce a 750,000-tonne tariff-free quota for wheat imports from countries outside of the South American Mercosur trade bloc in November, a government official said on Monday.

Flavio Bettarello, the agriculture ministry’s assistant secretary for trade and foreign relations, told an industry conference that enforcing the new tariff-free quota could help Brazil add new suppliers, including the United States and Russia.

The government is still pondering how to implement the quota in November, he told Reuters on the sidelines of the conference, explaining that it could be introduced via an order from the Special Secretariat for Foreign Trade and International Affairs (Secint) or from the Executive Secretariat of Foreign Trade (Camex).

The Brazilian millers’ association Abitrigo welcomed the new quota, which was announced as part of a series of measures to open up Brazil’s economy and increase the country’s share of global agricultural trade.

“Millers require we are open to world markets to get the best wheat at the best cost possible,” Eduardo Assencio, Abitrigo general superintendent, said on the sidelines of the conference.

Brazil currently levies a 10 percent tariff on all wheat imports from outside Mercosur, which also includes Argentina, Paraguay and Uruguay.

Abitrigo representatives were impressed on a visit to Russia last month that in 30 years the country “went from being a wheat importer to become the world’s largest exporter of wheat,” Assencio said.

“At one point this year, even with the tariffs, Russian wheat would have arrived up to $15 cheaper than Argentina’s,” Assencio said, citing Abitrigo calculations.

Pablo Maluenda, an analyst at INTL FCStone, said “the best recipe” to increase Brazil’s consumption of wheat-based products is combining a strong currency with economic growth.

On average, Abitrigo estimates, Brazilians consume 40 kilograms (88 lb) of wheat per year, compared with 200 kg in Russia.

According to Maluenda, Russia has accounted for 23 percent of the global wheat trade. Together with the European Union, he expects these countries will continue “to lead” the market in terms of pricing and volumes.

Bettarello predicted that Argentina, which exported 3.41 million tonnes of wheat to Brazil from January to July 2019, would continue to be a key provider.

Brazil was the world’s sixth largest wheat importer in 2018, Bettarello said.

The government forecasts Brazil, a net importer of wheat, will buy 7.2 million tonnes from foreign suppliers this year. Through July, Brazil imported 3.87 million tonnes of wheat, Abitrigo data show.

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