The Brazilian wheat market is going through a period of firm prices, driven by the limited supply of the old crop and the growing need for imports to supply the milling industry during the inter-harvest period.

In the states of Paraná and Rio Grande do Sul, remaining inventories continue to decline, while producers maintain a cautious approach to sales, limiting the availability of grain in the domestic market. This scenario has kept wheat prices firm, although stronger gains are constrained by import parity, which serves as the main benchmark for buyers.

For flour mills, however, the challenge extends far beyond rising raw material costs. The main concern lies in the difficulty of passing higher wheat prices on to flour prices, while wheat bran-a key component of milling industry revenues-continues to lose value in the market.

Figures from the first half of 2026 clearly illustrate this dynamic. Between January and June 2026, the average price of wheat increased from R$1,262 to R$1,470 per metric ton, a rise of 16.5%, based on the CIF Greater Curitiba (Paraná) market.

During the same period, flour prices increased by less than 5%, highlighting a significant gap between the performance of the industry's primary raw material and its final product. In other words, wheat prices increased more than four times faster than flour prices.

This disparity reflects a market characterized by relatively weak demand, intense competition among flour mills, and the difficulties faced by the bakery, pasta and biscuit industries in passing higher costs on to final consumers, limiting the milling sector's ability to rebuild profit margins.

The situation becomes even more challenging when analyzing the performance of wheat bran. As an unavoidable co-product of the milling process, it accounts for approximately 25% of processed volume and plays an important role in the industry's revenue structure.

However, between January and June 2026, wheat bran prices fell by 22%. Compared with June 2025, the decline reaches approximately 25%.

As a result, while the cost of the industry's main input continues to rise, a significant portion of the revenue generated from milling products is moving in the opposite direction, placing even greater pressure on sector profitability.

This decline in bran prices is primarily the result of structural market factors. Bran supply depends directly on the pace of wheat milling, rather than on its own demand dynamics.

At the same time, the product faces growing competition from alternative animal feed ingredients, particularly DDGS (Distillers Dried Grains with Solubles) produced by the expanding corn ethanol industry, as well as rice bran, soybean hulls, and other agricultural co-products available on the market.

Consequently, the market is characterized by abundant supply, more selective demand, and limited pricing power, reducing the contribution of wheat bran to overall mill revenues.

The effects of this combination are directly reflected in milling margins.

Based on a simplified analysis, assuming the purchase of 1,000 kilograms of wheat and the sale of the resulting milling products-750 kilograms of flour and 250 kilograms of wheat bran-at the average prices recorded during the same month, the estimated gross margin declined from approximately R$935 per metric ton processed in June 2025 to around R$695 per metric ton in June 2026, representing a decrease of nearly 26%.

Meanwhile, the recovery rate-which measures how much of the investment in wheat purchases is recovered through the combined sale of flour and bran-fell from 62% to just 47%, one of the lowest levels recorded for the period, highlighting the significant deterioration in industry profitability.

This situation helps explain the cautious stance currently adopted by the Brazilian milling industry.

Although supply fundamentals remain bullish and wheat inventories continue to tighten, flour mills face real economic constraints that limit their ability to absorb additional increases in raw material costs.

In short, the sector is operating in an environment where it purchases increasingly expensive wheat, can transfer only part of those higher costs to flour prices, and simultaneously receives lower revenues from the sale of wheat bran.

This combination has significantly compressed milling margins and is expected to continue shaping the industry's purchasing strategies over the coming months, even in an environment of tight supply and a growing dependence on imports.

Elcio Bento
Market Intelligence Specialist - Wheat
Safras & Mercado

Editor's Note: This article was originally written in Portuguese and translated into English by the Agrolatam.com editorial team.