February 15, 2013

Logistical Bottlenecks Develop in Parana as Harvest Begins

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

A potential record grain harvest has just gotten underway in Parana and already there are problems with inadequate storage and logistics. According to the State Secretary of Agriculture (Deral/Seab), 6% of the full season corn crop has been harvested in the state. The soybean harvest in the state is more advanced at 16% of the total. The most advanced harvest pace is in the southwestern and western part of the state in municipalities such as Toledo where 65% of the soybeans have been harvested, Campo Mourao with 35%, and Cascavel with 30%. In northern Parana the soybean harvest is expected to start at the end of February.

Deral/Seab is estimating that the full-season corn crop will be 7 million tons or 5% more than 2011/12 in spite of a 13% reduction in planted acreage (972,000 hectares planted to full season corn in 2011/12 and 845,000 hectares planted in 2012/13). Safrinha corn production in the state is expected to be 11.4 million tons or 14% more than the 10 million tons produced in 2011/12.

With the corn and soybean harvest occurring simultaneously, cooperatives in Parana are scrambling to find enough trucks and storage space to handle the influx of grain. To complicate the situation even more, some of the silos in the state are still full of wheat which was harvested last October. A lot of the wheat is owned by the government (Conab), but since they do not have enough space of their own, they lease space in private storage facilities. These silos will only become available after Conab sells the wheat to local millers through a series of public auctions.

Every agricultural cooperative in the state is expecting a very difficult logistical situation this harvest season due to the increase in grain production and the lack of improvement in the state's infrastructure. Coamo, which is headquartered in Campo Mourao in western Parana, is the largest cooperative in Latin America, and they have been forced to lease 350 trucks to supplement the 350 trucks they already own.

Even though the state of Parana has one of the better rail systems in Brazil, the cooperative would rather send the grain to the Port of Paranagua via truck rather than by rail because it is cheaper and faster to send it by truck. During the peak of the export season, this one cooperative alone has a truck passing about every thirty minutes along the major highways leading to the Port of Paranagua. The cooperative realizes that additional storage would be a way to save on transportation costs because the grain could then be shipped during the off season when freight rates are cheaper, so therefore, the cooperative is investing R$ 200 million over the next two years to increase their storage capacity.

The Agraria Cooperative, which is in central Parana and only 350 kilometers from the Port of Paranagua, is located on a rail line that connects it to the port, yet the vast majority of their grain is transported to the port by truck. The cost of moving the grain by rail is essentially the same as it is by truck, but it is much slower.

From the city of Maringa in northern Parana, it takes three days for a rail shipment of grain to arrive at the Port of Paranagua, but it only takes eight hours for a tucks full of grain to reach the port and unload. The basic problem is twofold. First there are not enough railroads to promote healthy competition and secondly, the railroads that do exist are very slow and efficient. As a result, the rail companies basically charge the same rate as the trucking companies regardless of where they are located in the state. The way to drive down the cost of rail transport is to build new and more efficient railroads, but until then, farmers and cooperative will see very little benefits from shipping their grain by rail.