South America Calling

Brazil's Logistics Set to Worsen in 2014

With no major improvements to Brazil's grain logistics over the past year to cope with a soybean crop that will potentially be 5% larger than last year, transport costs will continue to rise in 2013-14.

The problem will be most acute in Mato Grosso, Brazil's No. 1 grains state, where with soy planting under way, the silos are still full with the bumper winter corn crop.

According to Daniel Latorraco, grains analyst at IMEA, a Mato Grosso farm-funded research institute, the corn will impede the smooth transport of the next soybean crop, which is expected to be 7% larger than the year before.

IMEA estimates Mato Grosso farmers have yet to sell some 10 million metric tons (mmt) of the state's 22 mmt crop, and a significant portion of the corn that has been sold remains in the state due to backlogs at ports.

Such are the delays at Santos and Paranagua that the next open spots for corn shipments are in November, leaving limited scope to accelerate shipments.

According to IMEA, up to 6 mmt of corn will still be in Mato Grosso silos in February, when the state's estimated 25 mmt soybean crop starts arriving.

Investment in Brazil's infrastructure has lagged badly behind the growth in grain production over the last two decades, resulting in logistical bottlenecks that have become increasingly acute over the last three years.

Indeed, the logistical problems could halt the growth in grain production in Mato Grosso, unless they are addressed quickly, said Carlos Favaro, president of the Mato Grosso Soybean and Corn Growers Association (APROSOJA-MT),

Freight between Sorriso, Mato Grosso's top-producing municipality, and Santos port reached R$300 per metric ton earlier this year, up 50% on the year before.

The greater volume and cross contamination of soybean and corn shipments could push transport costs another 10% to 20% higher next year, according to IMEA's Latorraca.

That's terrible news for farmers as freight already gobbled 23% of the free-on-board price for soybeans from Sorriso this season.

The extent of the bottleneck depends on how much corn Brazil can export over the next four months.

Between February and August, Brazil shipped 8.8 mmt of corn and will probably end September shipping another 2.5 mmt to 3 mmt.

If ports operate well, another 12 mmt could be shipped between October and January, it would ease the situation greatly. But that is a tall order as during this period Brazil must compete with the freshly harvested U.S crop.


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