February 9, 2017

Farmers in Brazil forced to Harvest Soybeans at Higher Moisture

The ideal situation would be to let mature soybeans dry down in the field to about 14% seed moisture before they are harvested. That would allow for safe storage of the seed without the need for drying the seed before storage. Unfortunately, that has not been possible this year in the state of Mato Grosso in central Brazil.

Persistent wet weather in Brazil is forcing farmers in Mato Grosso and throughout Brazil to harvest their soybeans between showers when they get a few hours of sunshine regardless of the seed moisture. They feel it is better to harvest the soybeans at high moisture and then to dry the soybeans afterwards instead of risking leaving the soybeans unharvested with the threat of more rain. As a result, some of the soybeans in Mato Grosso have been harvested at 28% to 34% seed moisture.

These high moisture soybeans must be dried before being put into storage or else the seed will quickly start to rot, especially under the high temperatures that are typical of central Brazil. The higher moistures means that more than the normal amount of soybeans need to be dried and they need to be dried for a longer period of time to get down to 14% moisture.

There are reports out of Mato Grosso of long lines of trucks waiting up to 24 hours to unload at the grain elevators due to limited drying capacity. If a typical dryer has a capacity to dry 100 tons per hour when the seed moisture is let's say 20%, it might only be able to dry 33 tons per hour if the seed moisture is above 30%. The fuel used for drying grain in Brazil is usually eucalyptus logs. Many grain elevators plant eucalyptus on their property specifically for the purpose of drying grain.

All of this drying drives up costs. Not only does it cost money to dry the soybeans, more trucks must be contracted because each truck is waiting for a longer period of time to unload. The added costs are passed on to the farmers in the form of discounts when they deliver the soybeans. For each percentage point of seed moisture above 14%, the discount can be 1.5% to 1.8% with each grain elevator free to set their discount rates.

Thus far, the wet weather has resulted in higher costs but not necessarily significantly lower seed quality. There is more rain in the forecast for Mato Grosso and central Brazil, so farmers are taking every opportunity of any brief dry window to harvest as much as they can. Additional heavy rains could result in lower seed quality and logistical bottlenecks.

With the harvest underway in Mato Grosso and the demand for trucks increasing, the freight rates have increased as well. The freight rate from the city of Sorriso in central Mato Grosso to the Port of Paranagua in southern Brazil is now R$ 300 per ton or approximately $2.60 per bushel. This calculation is using an exchange rate of 3.1 Brazilian reals per dollar, which is the strongest the real has been in three months. The freight rate will decline once the peak of the harvest and the export season has passed.

It would seem that having on-farm storage and drying capabilities would soon pay for itself just in reduced freight costs. If a Brazilian farmer could store his soybeans for 4-5 months until the peak demand for trucks has passed, they could probably save as much as a dollar per bushel just on the freight rate alone.