August 8, 2012

Logistical Gridlock Expected in Brazil in 2013

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

Brazilian farmers, grain merchants, processors, and exporters are bracing for even more logistical gridlock in 2012/13 when Brazil is expected to plant a record soybean crop in addition to expanding its safrinha corn production as well. During this past year, even with a significant decline in full-season corn and soybean production, there were very long lines of vessels waiting to load at Brazil's southern ports. The chronic congestion was aggravated by excessive rainfall in June, a strike by Brazilian truck drivers, and a work slowdown by sanitation inspectors at the ports.

The congestion at the ports is particularly frustrating because it could limit Brazil's ability of ramping up its corn exports to take advantage of a smaller corn crop in the U.S. The farmers in Mato Grosso are wrapping up their safrinha corn harvest of 14 million tons (double last year's production), but there are concerns about how to get the huge crop to the ports and if the ports will be able to handle the corn in a timely fashion.

The entire logistical situation is expected to get worse in 2013 especially in the interior of the country. Mato Grosso for example, is expected to increase their soybean acreage 500,000 to 1 million hectares. Additionally, they are expected to increase the safrinha corn acreage as well in the state. If the yield of both crops turns out to be very good, there will be significant problems in storing and transporting both of those crops in 2013.

The president of the Brazilian Vegetable Oil Association (Abiove) Carlo Lovatelli expects a shortage of trucks next year to transport an expected record large soybean crop. He is also concerned that the country does not have enough storage space for both the soybean and corn crops.

The one thing farmers in Mato Grosso are hoping for is an early completion of the new highway linking Mato Grosso with the port city of Santarem, which is located on the Amazon River. Once completed, the cost of transporting soybeans from northern Mato Grosso to the Amazon River port could be as much as 34% cheaper compared to shipping the soybeans out of southern Brazil. The new export facility could eventually handle as much as 30% of Mato Grosso's soybean and corn production, but currently the capacity at the port has not been increased enough to handle the expected flood of grain shipments from the state.