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August 10, 2012

Conab Struggles to move Corn Supplies to Needed Regions of Brazil

Even though Brazil produced a very large corn crop in 2011/12, the corn is out of position and the federal government is having a very difficult time getting the corn to regions of the country that are in desperate need for additional corn supplies. The excess corn supplies are basically in the state of Mato Grosso while the corn is needed in northeastern Brazil, northern Brazil, and southern Brazil. As far as the federal government is concerned, Conab is in charge of distributing the corn, but they are having a difficult time arranging for enough trucks to transport the grain.

The problem is most acute in northeastern Brazil where a severe drought has depleted their already meager feed stocks. Most small farmers in the region are dependent on the federal government for additional feed supplies for their livestock, but Conab has been able to supply only a fraction of the corn needed in the region.

Conab's problem in moving the corn is primarily the result of new regulations governing how long truck drivers may work during a 24-hour period. The regulations have significantly reduced their working time and as a result, the volume of trucks available has been reduced as well. Additionally, drivers are very reluctant to transport corn from Mato Grosso to northeastern Brazil because they have little possibility of back-hauling any cargos, which mean they will lose money in the process. The regulations are also forcing truckers to take short hauls and to avoid hauling grain long distances where they would lose even more money.

As a result, Conab is finding it very difficult to contract any truckers to move gain. Of the 400,000 tons of grain that Conab has committed to northeastern Brazil, only 100,000 tons has been delivered thus far. In an attempt to remedy the situation, Conab is working with the state governments in the region trying to establish a subsidy program for truckers so they will consider transporting grain to the region.

Drivers are more open to transporting grain to Brazilian ports in southeastern Brazil because there is a greater potential of back-hauling inputs such as consumer goods, fertilizers, seeds, and chemicals, etc. The entire logistical situation in Brazil is expected to get even worse in 2013 when Brazil is expected to produce a record large soybean crop.