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June 26, 2018

Grain Trade in Brazil has been Minimal for more than Three Weeks

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

Brazilian farmers have been unable to take full advantage of the strong demand for Brazilian soybeans due to logistical bottlenecks in Brazil. Due to the ongoing dispute over freight rates, buyers have basically been out of the grain market for over three weeks because they are unwilling to pay the much higher freight rates that the government agreed to in order to end the truck driver strike at the end of May.

Buyers in Mato Grosso for example, have made very few purchases of grain for more than three weeks and it will probably continue that way until the freight rate issue is resolved. Not only is this issue disrupting current marketing, it is also disputing the movement of grain to the ports that was sold back in April and May when premiums at the ports were very high. It is also disrupting the movement of fertilizers from Brazilian ports into the interior of the country (see next article),

The Mato Grosso Institute of Agricultural Economics (Imea) estimates that farmers in the state still need to sell approximately 32% of their anticipated safrinha corn production. Imea estimated the corn crop was 12.5% sold as of last Friday.

Some companies and truckers have continued to do business with each other at market freight rates and not the new freight rates. The companies run the risk of paying a fine by utilizing market freight rates. Under the new plan, the truckers are given the right to take the company to court and ask for a penalty of double the difference between the market rate and the new rate. Some truckers for their part are willing to accept the lower market rate just so that they can keep working. Any contract signed before the new rates were issued are grandfathered in and they will continue to be at market freight rates.

My guess is that the truckers will not take the companies to court for fear of retribution from the companies who may refuse to do business with them in the future. Additionally, this entire issue is yet to be resolved in the Brazilian courts and the higher rates may be declared illegal as the companies claim. In that respect, I do not think the truckers want to undergo the time and expense of going to court when the court may decide that the new rates are actually illegal.