February 9, 2012

Transportation Cost Could Increase 10% at Peak of Soy Harvest

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

Dryer weather has allowed farmers in Mato Grosso to accelerate the pace of the soybean harvest. According to the Mato Grosso Institute of Agricultural economics (Imea), approximately 12% to 13% of the soybeans in the state have been harvested. As the harvest advances, the already high cost of transporting the soybeans to export facilities in southern Brazil is expected to increase another 10%.

Due to a lack of infrastructure, approximately 60% of the soybeans in Brazil still move across the country by truck, which is the most expensive way of transporting bulk commodities such as grain. The current cost of transporting a ton of soybeans by truck from Rondonopolis, which is located in southeastern Mato Grosso, to the Port of Paranagua in southern Brazil is R$ 112.50 per ton or approximately US$ 1.80 per bushel. That same ton of soybeans transported from Sorriso, which is located in central Mato Grosso, to the port is going to cost R$ 160.00 per ton or approximately US$ 2.57 per bushel.

The high cost of transportation is the principal reason why Mato Grosso is one of the highest cost regions in the world to grow soybeans. It's the farmers in Mato Grosso who eventually pay the cost of transporting the soybeans by receiving less for their soybeans. They must also pay higher costs for their inputs such as fertilizers, also due to the inadequate transportation system.

The poor infrastructure also takes a toll on the truckers and the trucking companies as well. The truck drivers not only have to put up with poorly maintained highways full of axil-breaking potholes, they must also endure long wait times to load and unload their soybean cargos. During the peak periods, the wait times can be as long as two to eight days. If a driver must wait in line for more than 24 hours, they are compensated for their time at the rate of US$ 0.17 an hour per ton.