Paraguay’s high-protein wheat may be too scarce to seize demand

ASUNCION/CHICAGO (Reuters) – Weather damage to crops in Paraguay has robbed the international wheat market of more supplies of the high-quality grain needed to make bread and snatched an opportunity for the country to cultivate customers other than its massive neighbor, Brazil.

Frost has been so bad that Paraguay may lose as much as half the 430,000 hectares sown this year, leaving it with just enough crop to cover domestic demand, Jose Berea, president of Paraguay’s chamber of exporters, known as Capeco, said this week.

Now Paraguay may even have to join the scramble for supplies of high-quality wheat that pushed benchmark prices on the Chicago Board of Trade to a two-year high in July, as drought has shrivelled output in major exporters including the United States and Australia.

“It is too early to know if we will have good-quality wheat. There is a chance that we will need to make some specific imports to improve the quality,” Berea said in an interview.

Paraguay was the world’s 15th-biggest exporter of wheat in 2016/17. The small, landlocked country of 6.7 million has spent decades developing strains that would grow in its climate, which is hotter than most wheat-growing countries.

Its wheat is also of such high quality – above 12 percent protein – that Egypt, the world’s biggest wheat importer, in November added Paraguay as the 14th country on its list of acceptable suppliers for state purchase tenders, although no shipments there have yet materialized.

Most of its wheat exports go to neighboring Brazil – a situation that Paraguay has been keen to change.

“It’s a concern to depend on one market,” said Santiago Bertoni, president of the Paraguayan Institute of Agrarian Technology. “We are working to diversify.”

In the previous crop year, Chile and Vietnam also bought wheat from Paraguay, and exports have previously gone to Uruguay, the Middle East and Africa, according to Sonia Tomassone, the international trade adviser for Capeco.

This year, buyers are looking for high-protein wheat to replace lost volumes from exporters including the United States and Australia.

A field of unharvested wheat is seen in Ciudad Del Este, Paraguay, July 26, 2017. Picture taken July 26, 2017.Francisco Espinola

But Paraguay may miss out. Its farmers had already cut back on acreage because of low revenue last season, prompting the U.S. Agriculture Department to forecast output of 850,000 tonnes in 2017/18, down from 1.284 million tonnes the previous year.

That could…

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