South America Calling

Brazil Soy Freight Rates Already at Record Levels

Pressure is already starting to build on Brazil's precarious soy logistics, causing freight prices to hit record levels in Mato Grosso.

With just half of the soybean crop harvested in Brazil's No. 1 soy state, the price of sending a metric ton of soybeans by truck from Sorriso, northern Mato Grosso, to Santos port has already reached R$330 ($141), topping last year's record of R$320, which was recorded in the first week of March when much more soy had been harvested, according to the Mato Grosso Soybean and Corn Producers Association (APROSOJA-MT).

The price of freight to port has jumped 35% in a month, and with an estimated 13.9 million metric tons (mmt) of soybeans still to be harvested in the state, pressure on prices will increase further, said APROSOJA-MT, utilizing figures published by the Mato Grosso Agricultural Economy Institute (IMEA).

"The soybean freight price could exceed (by) 40% that registered last March," said APROSOJA in a release.

The pressure is coming from a larger crop. Output in Mato Grosso will grow 14% to reach 26.9 mmt in 2013-14, according to IMEA, while Brazilian output will grow 8%-10% to approximately 88 mmt to 90 mmt.

The strain is accentuated by the chronic lack of storage space in Mato Grosso, which forces farmers and trading firms to truck soybeans off as quickly as possible. This, in turn, puts pressure on port operations, which are deluged with beans come harvest time.

That's why you see the pictures of massive lines of soybean trucks at ports. And the lines will appear once again this year, admitted Antonio Henrique Silveira, special minister for ports.

"The country needs more infrastructure, but it isn't possible to provide it immediately," he told local daily O Estado de S. Paulo.

There have been investments and efficiency gains at grain terminals over the last year. According to Agriculture Ministry figures, Brazil's grain export capacity has risen to 83.5 mmt in 2014 from 76.2 mmt last year.

But exports also continue to grow and are concentrated in increasingly short periods. As a result, there is a question mark over whether Brazil can fully utilize that extra 7.3 mmt of claimed new capacity.

Brazil will export 44.5 mmt of soybeans and 13.7 mmt of soymeal in 2014, according to the Brazilian Oilseed Industry Association (ABIOVE), as well as 28 mmt of corn, according to Celeres, a local farm consultancy. That's over 4 mmt more than last year.

Ship lineups are already growing vertiginously at ports and the familiar signs of chaos are appearing. The question is how bad will the chaos be? That greatly depends on how many loading days Brazil's grain terminals lose to rain.



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