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Brazilian wheat mills face contract cancellations, price hikes

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The conflict between Russia and Ukraine is unlikely to cause a shortage of wheat in the Brazilian market. However, the immediate consequences are contract cancellations and price increases for mills, which will later be passed on to the flour.On Thursday, as soon as Russia started bombing its neighboring country and the grain prices skyrocketed in Chicago, a flour supplier from Argentina canceled a contract with Paraná-based mill Rio Azul to deliver nine shipments, or about 250 tonnes, in March."They told me that Argentine producers stopped the supply and, therefore, they don’t know if they will be able to deliver the flour to us or at what price," said Paulo Henrique Zanini, general manager of the mill.Rio Azul buys Argentine flour to blend with its own wheat milling from Paraná, Rio Grande do Sul and Paraguay. "They are a long-time supplier, which we usually don’t have problems with," the executive said.Mr. Zanini fears that other suppliers will follow suit, or at least try to adjust contract values. "As benchmark prices rise in Chicago, we will certainly have a significant cost increase," he said. Wheat accounts for 70% of the mill’s production cost.On the consumer’s side, Mr. Zanini thinks that the adjustments will only be felt in April. "We need to see if there will be an accommodation, a correction in the stock exchange or even how the exchange rate will be."The Brazilian Association of Wheat Industrial Companies (Abitrigo) does not see problems in the supply of wheat to Brazil in the short term, but takes for granted the increase in prices predicted by Rio Azul’s executive.Abitrigo’s head Rubens Barbosa, a former ambassador, said that "Argentina has enough wheat to meet Brazilian needs, Russia supplies us with a minimum volume and Ukraine, nothing."For him, Brazil is likely to...

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