December 13, 2011

Lack of Storage Facilities is Chronic Problem in Brazil

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

One of the continuing infrastructure problems in Brazil is the lack of storage facilities to store their ever expanding grain production. In the state of Mato Grosso for example, the amount of storage capacity has not kept pace with the increasing acreage and gains in productivity. In total terms, the amount of storage space in the state is 12% less than the anticipated grain production.

The only thing that keeps the state from suffering crippling storage problems is the fact that the soybean harvest is spread out over several months and some of the storage can be turned over while the harvest is in progress. Additionally, the soybean and corn crops are harvested at different times during the year because nearly all of the corn that is produced in the state is planted as a second crop after the soybeans have been harvested, so the corn is harvested several months after the soybean harvest is complete.

According to Conab, there are 2,128 storage facilities registered in the state and collectively they can accommodate 27.408 million tons of grain. The state's anticipated grain production in 2011/12 is expected to be 31.312 million tons and that does not include carryover stocks.

Conab estimated that 50% of the soybeans are stored within the state waiting processing and the remainder of the crop is shipped to exporters generally is southeastern ports. The increasing number of soybean crushers in the state means that the soybeans remain in the state for a longer period of time and they must be stored while waiting processing.

According to the technical director of the Association of Soybean and Corn Producers in Mato Grosso, Luiz Nery, the storage situation becomes most acute when the safrinha corn crop is being harvested. By the time they start to harvest the anticipated 10 million tons of safrinha corn, the farmers in the state have already harvested and stored over 20 million tons of soybeans.

During the last three months, Conab has registered three new storage facilities in the state with a combined capacity of 300,000 tons. It is expected that the federal government will give additional incentives in the form of low interest loans for the construction of additional storage facilities especially on-farm facilities. If farmers can store their grain on-farm, then there is reduced pressure to sell the grain during harvest when prices are lowest and transportation costs are the highest. The new incentives are expected to be included in the 2012/13 Harvest Plan.