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February 8, 2018

Brazilian Farmers Face Higher Transport Costs and Problems

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

In addition to worrying about the weather, Brazilian farmers also have to worry about logistical and transportation issues as well. Farmers in Mato Grosso for example are in the midst of harvesting their 2017/18 soybeans and now they are facing a 10% increase in transportation costs as well as traffic problems on highway BR-163 in northern Brazil.

Freight rates to haul grain in Mato Grosso increased 10% at the start of 2018. Truckers had requested the increase in response to a 25% increase in diesel prices during the second half of 2018. According to the Grain Transporters Association (MTG), the increase was needed to insure profitability for its members especially with traffic problems once again along highway BR-163 in northern Brazil.

According to MTG, a trucker loses R$ 800 per day (approximately $250) for each day a truck is stopped and not hauling grain. The longer trucks are stopped due to traffic problems, the more they have to charge to haul grain. Approximately 60% of the grain in Mato Grosso is moved by truck, which is much more expensive than by rail or water.

Over the past week, heavy rains in a mountainous area in the state of Para, caused an interruption of traffic along unpaved sections of BR-163 due to muddy and slick conditions. The situation has improved over the last few days due to dryer weather, but a return of heavy rain could close the highway once again. At one point, there were approximately 4,000 trucks in a traffic jam waiting to head north to ports on the Amazon River. Each of the double trailer trucks carries about 50 tons of soybeans. Some of the trucks had been stopped for up to eight days before the traffic started to move again over the last few days.

The National Infrastructure and Transportation Department (Dnit), which is in charge of the highway, feels the situation should return to normal very soon.

BR-163 is the main link between Mato Grosso and the "Northern Arc" of ports along the Amazon River. The National Association of Cereal Exporters (Anec) indicated that 9% of Brazil's soybean exports in 2017 moved through two ports on the Amazon River, the Port of Santarem and the Port of Barcarena, which is near the mouth of the Amazon River.

A similar problem occurred last year, also due to heavy rains. Highway officials felt they were better prepared this year by prepositioning 220 employees and machinery in December along the highway. The employees were from of the Federal Highway Police and the Brazilian Army, which is responsible for asphalting the highway.

Approximately 180 kilometers of BR-163 remain to be asphalted and work is expected to resume in April when the summer rains start to end. The entire project is scheduled to be completed before the end of 2018 and in time for the next rainy season.

Highway BR-163 catches all the media attention, but there are numerous rural roads in Mato Grosso and throughout central Brazil that are unpaved and unpassable during the peak of the rainy season.