Brazil’s mills turn to U.S. wheat on Argentine export limits

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Brazilian flour mills are importing nearly all of their wheat from the U.S. instead of Argentina, their usual supplier, due to Argentine export restrictions.

Argentina regulates wheat shipments abroad in order to ensure domestic food supply, and traders in December said the government had not allowed 1.6 million tonnes of wheat that was already sold to leave the country.

Brazilian mills cannot wait on Argentina without risking scarcity and inflationary pressure on the local market.

“More U.S. wheat is arriving than we had imagined. Today there is no alternative other than buying American wheat,” Lawrence Pih, CEO of Brazil’s biggest flour-milling group, Moinho Pacifico, said on Tuesday.

Another mill and a wheat trader in Brazil reported the same dependence on the U.S.

Brazil purchased more wheat from the U.S. than from Argentina between January and November 2013, according to Brazil’s agriculture ministry. Millers imported three million tonnes of U.S. wheat in that period compared with just 54,000 tonnes a year earlier.

The U.S. Department of Agriculture said 236,300 tonnes of U.S. wheat were shipped to Brazil in December.

Brazil allows wheat to be imported tariff-free from Argentina because both members belong to the regional trade bloc Mercosur. Wheat from the U.S. is subject to a 10 per cent tariff, in addition to much higher freight costs.

Pih said the decision to endure the 40-day wait and higher costs for U.S. wheat is extremely difficult for millers given that Argentina might approve some wheat exports at any time.

– Reporting for Reuters by Gustavo Bonato in Sao Paulo; writing by Caroline Stauffer.