Brazil’s transportation logistics and grain storage capacity have not kept pace with the increased agricultural production in recent years which has put upward pressure on freight rates. In other words, the grain production has increased faster than the number of trucks available to transport the grain or the number of silos needed to store the grain.
In Brazil approximately 61.1% of the crops moves by truck, 20.7% by rail and 13.6% by barge according to the National Transport Confederation (CNT). Unfortunately, truck transportation is the most expensive way to transport grain in Brazil and much of the grain is produced long distances from the major ports.
For example, the distance from the city of Sorriso in central Mato Grosso to the Port of Paranagua in southeastern Brazil is approximately 2,209 kilometers (1,370 miles). This is equivalent to the distance from Des Moines, Iowa to Orlando, Florida (1,345 miles) and most of it is on 2-lane highways that are toll roads.
The cost of freight from Sorriso in central Mato Grosso to the Port of Paranagua was in the range of R$ 20 to R$ 22 per sack ($1.74 to $1.92 per bushel), but it has now increased to R$ 30 to R$ 33 per sack ($2.62 to $2.88 per bushel) and it could reach as high as R$ 40 per sack ($3.49 per bushel).
Market analysts predict that freight rates could increase another 10% to 15% over the next two months as the soybean harvest reaches its peak. The soybean harvest is delayed this year and those delays could also result in grain silos still being full of soybeans when the safrinha corn harvest starts in June. That could put even more upward pressure on freight rates because of a lack of storage space.
For years, Brazil has struggled with a lack of storage space for its increasing grain production, but it has not been as critical for the last two years due to lower production caused by drought in southern Brazil. Drought is still impacting the production in Brazil’s southernmost state of Rio Grande do Sul, but the remainder of Brazil is expecting to harvest a record soybean crop of over 150 million tons.
