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July 25, 2018

Freight Impasse Delaying Fertilizer Deliveries in Brazil

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

Everyone was hoping that the freight rate impasse would had been resolved by last Friday (July 20th), but that was not the case. The National Land Transportation Agency (ANTT) will not issue new rates until sometimes after the public comment period ends on August 3rd. The Brazilian Supreme Court will not take up the issue until their next hearing scheduled for August 27th. Therefore, it now appears that the issue will not be decided until sometime in August, if then.

In the meantime, the newest concern in Brazil is that the freight rate impasse is delaying the deliveries of fertilizers to the interior off the country. Approximately 70% of Brazil's fertilizer needs are imported and the number one entry point for fertilizers is the Port of Paranagua in southern Brazil. The uncertainly over freight rates has resulted in much of the imported fertilizers being stranded at the port.

Farmers in southern Brazil will start planting their full-season corn later in August as the weather permits. The first soybeans in Brazil are usually planted in Mato Grosso and farmers are allowed to start planting on September 15th. Farmers in Parana would normally have all their fertilizer, seed, and chemicals in place by now and as soon as the weather permits they would start planting corn.

The president of the Mato Grosso Soybean and Corn Producers Association (Aprasoja) has indicated that only one-third as much fertilizer has been delivered to the state compared to last year. The president of the Organization of Cooperatives in Parana, indicated that only 40% of the fertilizer, seed, and chemicals have been delivered.

When it comes time to plant, Brazilian farmers are going to plant if they have received all their fertilizer needs or not. If they are short on fertilizer, they will probably use less, which could impact potential soybean yields.

The impasse over freight rates is causing a problem that is probably unique to Brazil. Many of the bigger farmers in Mato Grosso obtain their financing through a barter system with the grain companies. They commit to delivering enough soybeans after harvest in exchange for the grain company to supply them the necessary inputs such as seed, fertilizer, and chemicals needed to plant the crop.

Unfortunately, the grain companies are now reluctant to enter into such an agreement because they do not know what the freight rate will be when it comes time to transport the soybeans to export facilities. Time is running short to resolve this financing because farmers in Mato Grosso will start planting their soybeans in less than two months.