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Brazilian mills limit wheat imports as inflation dents domestic demand

By Nayara Figueiredo

SAO PAULO, Sept 2 (Reuters) - Brazilian mills have limited imports of wheat due to rising prices and the impact of domestic inflation on consumption, which affected demand for pasta, cookies and bread, industry representatives and analysts said on Friday.

Wheat imports through July reached the lowest levels since 2017, totaling about 3.7 million tonnes, according to government data.

In August, the downward trend continued, as imports fell 9.7% compared to the same month last year, to 536,600 tonnes, despite the period marking the peak of the inter-harvest period, when the new wheat crop is not yet available to local millers.

The average price of the imported tonne shot up to $441 last month from $276.3 in August of last year, according trade data.

Global wheat prices were impacted by the war in Ukraine and the effects of the pandemic, Rubens Barbosa, executive president of flour millers association Abitrigo, said.

"And it (the rise in prices) will continue, because the war is likely to continue with prices remaining high, even if with more oscillations because the product from Ukraine is being shipped," Barbosa added.

Brazilian wheat production could reach a new record of almost 10 million tonnes in 2022 after a historical high of 7.6 million tonnes in 2021, Barbosa said.

However, the country should end the year with about 3 million tonnes exported and domestic demand of 12 million, meaning it will continue to be net importer for some time.

Imported wheat is currently cheaper than domestic wheat, said Luiz Pacheco, analyst at Trigo & Farinhas consultancy. But with domestic consumption weaker, mills are not importing. Instead, they are reducing processing until the new crop is ready.

"The consumer is switching from egg pasta, which costs more, to instant pasta, which costs less," Pacheco said. Consumers are also buying smaller packages and changing brands. "This shows the reduction in demand for flour by-products because of inflation." (Reporting by Nayara Figueiredo; Editing by Sandra Maler)

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