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UPDATE 1-Big Brazil mill says Argentina won't make Jan wheat delivery
December 19, 2013 / 6:00 PM / in 4 years

UPDATE 1-Big Brazil mill says Argentina won't make Jan wheat delivery

(Adds details, wheat futures prices)

SAO PAULO, Dec 19 (Reuters) - 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 traders.

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)

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