(Adds details, wheat futures prices)
SAO PAULO Dec 19 Brazil's biggest flour milling
group, Moinho Pacifico, said an Argentine trader that supplies
wheat informed the mill on Thursday it will not be able to meet
its delivery contract for January.
Lawrence Pih, chief executive of Pacifico, said in an
interview the "default" on delivery will force Brazil's flour
milling industry to look for wheat elsewhere. Argentina is
Brazil's main source of foreign wheat this time of year.
Pih said getting fresh U.S. wheat to a Brazilian port will
take at least 45 days, and from other countries will take
longer. Pacifico is often seen as a bellwether for Brazil's
wheat milling industry.
Local mills do not have the luxury of waiting to see if the
Argentine government decides to open its wheat for export
without risking inflationary pressures on the local food market.
"We received official communication from the trading house
that it is not able to fill its contract for January," Pih said.
"Technically and officially, this is a default."
The Argentine government has not released authorization for
the shipment of wheat from the 2013/14 crop, according to
Brazil has been turning to North America to cover local
wheat demand in the absence of sufficient supplies from
neighboring Argentina, where the government has restricted
exports to ensure local supplies.
"The problem is that we are running to import American
wheat, but the lineup of ships in the Gulf is very long, it's
going to be delayed," Pih said.
On Wednesday, European traders said Brazilian mills bought
50,000 tonnes of U.S. wheat for January delivery, due to fears
over supply shortages.
Brazil consumes roughly 11 million tonnes of wheat a year
and produces only 4 million to 6 million tonnes itself, forcing
it to turn to the international market to fill the gap.
(Reporting by Gustavo Bonato; Writing by Reese Ewing; Editing
by Gerald E. McCormick and Jeffrey Benkoe)