The 20% reduction in planted area and an almost 28% decline in potential production place Brazil before a new challenge: increasing its reliance on foreign markets precisely at a time of growing volatility in global wheat trade.

Brazil is about to enter a new chapter in its wheat production history. The final survey figures for the 2026/27 crop year reveal a much deeper contraction than a simple market fluctuation. If estimates are confirmed, the country will record its lowest production level in recent years and, consequently, the largest wheat import requirement in its history to ensure domestic supply.

The planted area was confirmed at 1.905 million hectares, a 20% decrease compared with the 2.381 million hectares cultivated in the previous season. The direct consequence is a potential production estimated at only 5.855 million metric tons, a volume 27.9% lower than the 8.120 million metric tons harvested in 2025/26.

National average yields are also expected to decline, falling from 3,410 kg/ha to 3,073 kg/ha, reflecting a more conservative strategy by producers, who reduced investments amid an environment of low profitability.

Although weather remains one of the main risk factors for the crop, the sharp decline in Brazil's wheat harvest did not originate in the fields. It began much earlier, during the planning stage of the season, when thousands of farmers had to decide whether it was worthwhile to invest in wheat once again. Across much of the country, the answer was negative.

The main reason for this shift was the deterioration in crop profitability. While production costs remained elevated, particularly due to higher nitrogen fertilizer prices following escalating geopolitical tensions in the Middle East, wheat prices continued to be pressured by abundant global supply and the competitiveness of imported grain.

This combination created one of the worst terms of trade in recent Brazilian wheat farming history, forcing producers to deliver increasingly larger volumes of wheat to purchase the same agricultural inputs.

The problem, however, goes beyond the relationship between prices and costs. After several consecutive years of reduced or negative margins, a large portion of producers entered the 2026/27 season under significant financial stress. High indebtedness reduced investment capacity, limited access to rural credit, and led many farmers to scale back their technological packages.

In several regions, the decision was to reduce planted acreage; in others, producers maintained sowing but with lower use of fertilizers, crop protection products, and high-yield seed varieties. The outcome is already reflected in current productivity estimates.

Another key element in this equation was the absence of an effective agricultural insurance policy capable of providing predictability to producers. In an environment of increasing climate instability, many farmers began to view investment in such a weather-sensitive crop as an excessive financial risk.

Without efficient risk mitigation mechanisms, preserving capital became the priority, even if it meant sacrificing productivity or reducing wheat's share within farming operations.

This perception was further intensified by expectations of a season influenced by El Niño. Although it is still too early to assess its actual impact on production, the possibility of a more unstable weather pattern increased producers' caution.

Excessive rainfall, late frosts, and harvest disruptions are factors that could compromise not only yields but also the industrial quality of grains, a particularly relevant issue for a country that already faces a structural deficit of milling-quality wheat.

The contraction occurred in an almost generalized manner. Rio Grande do Sul, the country's largest producer, reduced its area by 28.6%, to 750,000 hectares, while potential production fell 33.3%, to 2.4 million metric tons.

In Paraná, planted area declined 13.5%, to 740,000 hectares, with estimated production at 2.2 million metric tons, representing a 21.4% reduction. Significant declines were also recorded in Santa Catarina, São Paulo, Minas Gerais, Goiás, the Federal District, Mato Grosso do Sul, and Bahia, demonstrating that the loss of competitiveness has been widespread.

Despite the sharp decline, current figures still represent only the initial production potential and do not incorporate possible weather-related losses during the growing cycle. The exception lies in Minas Gerais and Goiás, where drought has already affected part of the rainfed wheat crop.

Even if the current potential is fully realized, national production will remain far below the country's consumption needs.

This is precisely what makes the 2026/27 season a milestone for the Brazilian wheat market. With production estimated at only 5.855 million metric tons, Brazil will need to import more than 8 million metric tons to balance supply and demand. This would likely represent the highest dependence on the international market ever recorded by the country.

This scenario gains even greater significance in the current global context. The world wheat trade is going through a period of high volatility, marked by tensions in the Black Sea region, uncertainties regarding production in major exporting countries, and increasing price sensitivity to geopolitical and climatic events.

The lower Brazil's domestic production, the greater the exposure of internal supply to exchange rate fluctuations, international logistics costs, and competition for available supplies among major importing nations.

More than a temporary reduction in production, these figures reveal an important change in the behavior of Brazilian producers. The decision to invest less in wheat is not merely a response to this season's conditions but rather the result of a gradual loss of competitiveness accumulated over recent years.

High costs, tighter credit conditions, insufficient crop insurance, compressed margins, and increased risk perception have altered the economic rationale of wheat production.

Nevertheless, it is important to remember that agricultural commodities are inherently cyclical markets. Historically, low prices themselves become the remedy for low prices, discouraging production worldwide, reducing supply, and eventually creating conditions for price recovery.

A higher international price environment would improve profitability and restore competitiveness to Brazilian producers. However, this market adjustment does not eliminate the need to address the structural challenges facing Brazil's wheat sector.

For wheat to become a more resilient crop, it will be essential to advance policies related to credit, rural insurance, and risk management tools, allowing producers to navigate inevitable downturn cycles without causing such severe reductions in area and production.

More than responding to market fluctuations, the challenge will be to build a supply chain capable of maintaining competitiveness and ensuring greater food security and supply stability for the country, regardless of the phase of the price cycle.

Fernando Iglesias: Economist specializing in agribusiness and agricultural markets.

Editor's Note: This article was originally written in Portuguese by Fernando Iglesias. The present English version was translated and editorially adapted by the AgroLatam.com newsroom team.