Voluntary Report - public distribution

**Date:** 11/3/2005

**GAIN Report Number:** BR5629

BR5629

**Brazil**

**Grain and Feed**

**Update**

**2005**

**Approved by:**

![](media/image1.wmf)Alan Hrapsky, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Oliver Flake, Agricultural Attaché

**Report Highlights:**

On October 24, Brazil published Normative Instruction Number 29 allowing
for the importation of wheat from Russia though immediate imports are
very unlikely given current market conditions. However, recent rains
during harvest in southern Brazil will increase import demand for
Argentine wheat and possibly non-Mercosul supplies. As Argentine prices
increase there is the possibility that U.S. and Russian wheat could be
imported later this marketing year.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Brasilia \[BR1\]

\[BR\]

After months of negotiations between the Brazilian and Russian
governments, Brazil published Normative Instruction number 29 (attached
below) on October 24 allowing for the importation of wheat from Russia.
The allowance of Russian wheat imports is believed to be a concession
resulting from a meeting last month in Russia between President Putin
and President Lula. In exchange for wheat access, Russian officials most
likely promised more lenient treatment for Brazilian meat imports.

Current market conditions make Russian imports in the near-term highly
unlikely. However, abundant rain during the harvest of the crop in
Parana last month significantly reduced the quality of wheat. Some
sources estimate that up to one million tons could be of feed quality.
However, given very low corn prices, the feed wheat/corn price spread
would not dictate the incorporation of wheat in feed rations at this
time. Therefore, imports from Argentina or higher quality wheat from
Northwestern Parana are likely to be mixed and milled with this poorer
quality wheat damaged by rain. Reports also suggest that at least some
of the feed quality wheat could be exported in the next several weeks.

While harvest is nearly complete in Parana, the crop is just beginning
to be harvested in Rio Grande do Sul and reports suggest the quality of
the crop could also be down due to heavy rains and sprouting in October.
The next several weeks will be critical as dry weather would facilitate
harvest and diminish the amount of feed quality wheat. Nevertheless,
lower quality overall for the Brazilian crop this year combined with a
much lower Argentine crop, could lead to imports from outside of
Mercosul later in the marketing year, including from Russia and the
United States. However, for that to occur Argentine prices will need to
increase significantly and/or Russian prices will need to fall.

+----------+-------+-------+--------+--------+-------+-------+-------+
| Exports  |       |       |        |        |       |       |       |
| and      |       |       |        |        |       |       |       |
| Export   |       |       |        |        |       |       |       |
| Shares   |       |       |        |        |       |       |       |
| of the   |       |       |        |        |       |       |       |
| B        |       |       |        |        |       |       |       |
| razilian |       |       |        |        |       |       |       |
| Wheat    |       |       |        |        |       |       |       |
| Market   |       |       |        |        |       |       |       |
|          |       |       |        |        |       |       |       |
| 2000/01- |       |       |        |        |       |       |       |
| -2004/05 |       |       |        |        |       |       |       |
| (Oc      |       |       |        |        |       |       |       |
| tober/Se |       |       |        |        |       |       |       |
| ptember) |       |       |        |        |       |       |       |
|          |       |       |        |        |       |       |       |
| (1,000   |       |       |        |        |       |       |       |
| Metric   |       |       |        |        |       |       |       |
| Tons)    |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
|          | **00  | **01  | **0    | **0    | **04  | **5-y | **5-y |
|          | /01** | /02** | 2/03** | 3/04** | /05** | ear** | ear** |
|          |       |       |        |        |       |       |       |
|          |       |       |        |        |       | *     | **Sh  |
|          |       |       |        |        |       | *Aver | are** |
|          |       |       |        |        |       | age** |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
| **Arg    | 7,080 | 5,950 | 5,721  | 4,637  | 4,501 | 5,578 | 90.4  |
| entina** |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
| **USA**  | 94    | 652   | 487    | 107    | 19    | 272   | 4.4   |
+----------+-------+-------+--------+--------+-------+-------+-------+
| **Pa     | 94    | 68    | 80     | 101    | 317   | 132   | 2.1   |
| raguay** |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
| **FSU    | 0     | 37    | 520    | 0      | 0     | 111   | 1.8   |
| and E.   |       |       |        |        |       |       |       |
| Europe** |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
| **       | 101   | 58    | 102    | 68     | 0     | 66    | 1.1   |
| Canada** |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
| **U      | 12    | 11    | 9      | 0      | 30    | 62    | 1.0   |
| ruguay** |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+
| *        | 7,381 | 6,776 | 6,919  | 4,913  | 4,867 | 6,171 |       |
| *Total** |       |       |        |        |       |       |       |
+----------+-------+-------+--------+--------+-------+-------+-------+

Source: Brazilian Ministry of Agriculture & U.S. Customs Service

As the chart above illustrates, Argentina is the dominant player in the
Brazilian market. However, when both Argentina and Brazilian supplies
are tight, exporters outside of South America have supplied significant
amounts of wheat. For example, Eastern Europe and the Former Soviet
Union (Ukraine, Russia, and Kazakhstan) entered the market in 2002/03
when supplies were needed and phytosanitary restrictions eased. U.S.
wheat is also competitive at times, particularly in the Northeast and
shipments from May to November can occur at the proper price spread (see
chart below).

![](media/image2.wmf)

**Normative Instruction Number 29/05- Informal Translation**

**Title: Phytosanitary Requirements for Wheat Imports from Russia**

MINISTRY Of AGRICULTURE, LIVESTOCK, AND FOOD SUPPLY

OFFICE OF AGRICULTURAL PROTECTION

NORMATIVE INSTRUCTION Nº 29, of 11 OF OCTOBER of 2005.

The SECRETARY OF AGRICULTURAL PROTECTION, of the MINISTRY of
AGRICULTURE, LIVESTOCK, and FOOD SUPPLY in the use of the attributions
conferred to him by art. 42, Annex I, of the Decree nº 5,351, 21 of
January of 2005, in view of the dispositions of Ministerial Directive nº
641, of 3 of October of 1995, in the Decree nº 318, of 31 of October of
1991, in art. 2º, of Directive nº 127, of 15 of April of 1997, the made
use one in Chapters I and II, of the Plant Health Regulations, approved
by the Decree nº 24,114, of 12 of April of 1934,

Considering the result of the Pest Risk Analysis of grains of *Triticum
aestivum,* produced in Russia, and rulemaking number nº
21000,000898/2003-47, decides:

Art. 1º. To approve the Phytosanitary requirements for the importation
of grains type wheat *Triticum aestivum* (category 3, class 9) produced
in Russia.

Art. 2º. Grains of Triticum aestivum according to Art. 1º above will
have to be accompanied by a Phytosanitary Certificate issued by ONPF of
the exporting country with the following additional declaration:

I - DA1: The shipment is free of Orobanche spp

Art. 3º the shipments of wheat from Russia will be inspected at the port
of entry, after the fumigation with bromide of metila for *Acarus siro*
and *Penthaleus major*, and will be collected samples for phytsanitary
analysis.

The costs of the shipments and phytosanitary analysis will be
responsibility of the exporter.

Art. 4º. The port of entry for shipments of wheat from Russia will be in
those states of the Brazilian Federation whose mills are located in the
port zone and in which they possess system of thermal treatment for
by-products of the wheat (meal, impurities and sweepings). The shipments
of Russian wheat will be processed exclusively in these mills, and it
will be prohibited the domestic transit of this product in natura. The
entry of Russian wheat is prohibited in the states of Parana, Santa
Catarina and Rio Grande do Sul.

Art. 5º Fumigation must be done at the point of entry before landing,
with bromide of metila, under normal atmospheric pressure, under the
following for pest control:

  ---------------- ---------------------- --------------------------------
  **Doses          Time of Exposure (h)   Temperature (ºC)
  (g/m^3^)**                              

  40               12                     32ºC ou mais

  56               12                     26,5 - 31,5ºC

  72               12                     21 - 26ºC

  96               12                     15,5 - 20,5ºC

  120              12                     10 - 15ºC

  144              12                     4,5 - 9,5º
  ---------------- ---------------------- --------------------------------

Art. 6º. The Plant Health Authority of Russia -- ONPF (in Portuguese)
will have to inform the ONPF of Brazil any alteration in the
Phytosanitary conditions of the production area.

Art. 7º. This Normative Instruction enters into force on the date of its
publication.

Signed by GABRIEL ALVES MACIEL, Secretary for Agricultural Protection
(SDA).

Note: THIS TEXT DOES NOT SUBSTITUTE the one PUBLISHED in FEDERAL
OFFICIAL GAZETTE OF 10/24/2005, SECTION 1, PAGE 2.