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December 23, 2010

Soybean Freight Costs in Brazil Could Increase 15% in 2011

Even with strong soybean prices, farmers in central Brazil remain concerned about the high cost of moving their soybeans to export facilities in southern Brazil. Transportation companies are estimating that freight cost to transport the 2010/11 soybean crop could increase 15% compared to the cost of transporting the 2009/10 soybean crop.

At the peak of the harvest and export season, trucking companies from all across Brazil send some of their fleet to Mato Grosso in an attempt to meet the spike in demand during this period. As a result, freight rates always increase during this period and that is expected to be the case again early next year.

In fact, the demand for trucks could be even worse next year due to the delayed start to the harvest. The soybean crop in Mato Grosso was planted 3-4 weeks later this year due to the delayed start of the summer rains. That means that the harvest will start later as well and more of the harvest will occur during a shorter period of time compared to previous years. The soybean harvest in Mato Grosso is not expected to be in full swing until early in February 2011.

Only one railroad services the state of Mato Grosso and the rail line only goes about 50 miles into the southeast corner of the state. Since the state is so large (six times bigger than the state of Illinois) transporting soybeans from the central part of the state to one of the two existing rail terminals is an expensive operation.

During the 2009/10 harvest season, the cost of transporting soybeans from Sorriso, which is located in central Mato Grosso and is the largest soybean producing municipality in Brazil) to the rail terminal at Alto Araguaia, which is located in southeastern Mato Grosso, was R$ 85 per tons or about US$ 1.40 per bushel. During the 2010/11 growing season, the cost is expected to increase to R$ 95 per ton or about US$ 1.55 per bushel.

What is amazing is that those costs are just to transport the soybeans to the rail terminal. From there, the soybeans will be shipped to the Port of Santos, which is another 1,500 kilometers away in southeastern Brazil. The total cost of transporting the 2010/11 soybean crop from central Mato Grosso to the ports in southern Brazil could be as high as US$ 3.00 to US$ 3.50 per bushel making it the most expensive transportation of any major soybean producing country.