April 5, 2012

Freight Cost for Brazilian Soybeans Increased 109% in Eight Years

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

As new soybean production moves further into the interior of Brazil, the cost of transporting the grain to export facilities in southern Brazil has increased tremendously. According to a report from the Pro-Logistics Movement, which is part of the Association of Soybean and Corn Producers of Mato Grosso (Aprosoja), over the last eight years, the cost of transporting grain from Mato Grosso to ports in southern Brazil has increased 109%. In 2003, it cost an average of US$ 62 per ton to move soybeans out of Sorriso, which is located in central Mato Grosso, to the Port of Paranagua in southern Brazil. In 2011, the cost of transporting that same ton of soybeans had increased to US$ 130 per ton.

The reasons for the increase in transportation costs are many fold including: rising fuel prices, increased tuck maintenance costs, higher salaries for truck drivers, reduced number of hours per day a driver is allowed to work, higher demand for trucks during the peak of the harvest, poor roads, and a lack of on-farm storage that would allow farmers to pay lower freight costs during the off-season.

If put on a per hectare basis, the cost of transporting soybeans out of Mato Grosso went from approximately US$ 187 per hectare in 2003 (approximately US$ 41.50 per acre using a yield of 43.5 bu/ac and an exchange rate of 1.8 Brazilian reals per U.S. dollar) to US$ 390 per hectare in 2011 (approximately US$ 87 per acre). Per bushel, it went from approximately US$ 0.95 in 2003 to US$ 2.00 in 2011. These transportation cost are averaged throughout the entire year, the costs are much higher during the peak harvest months of January, February, and March.

Since the transportation costs are based on dollars, the currency exchange rate between the Brazilian real and the U.S. dollar is another thing Brazilian farmers must worry about. Farmers in Brazil have been asking the Brazilian government to adopt a monetary policy where the Brazilian currency would weaken in comparison to the U.S. dollar and that is what has happened over the last several weeks. For Brazilian farmers, a weaker domestic currency is exactly the same as a price increase for their soybeans.

If more on-farm storage was available, farmers could save a considerable amount of money by shipping their soybeans after the peak harvest season. In fact, a few farmers are actually planting their soybeans much later than what is recommended because they feel they can save enough money on harvest and transportation costs to offset the increased cost of fungicides and insecticides needed to produce a late developing crop.