March 3, 2016

Farmers in Central Brazil face Higher Freight Costs and New Tolls

As the peak of the grain shipments nears, the freight rates for trucking soybeans out of the center-west region of Brazil are expected to be up 30% compared to March of 2015, which is considerably more than inflation during the past twelve months (approximately 10%). In contrast, maritime freight rates to transport the soybeans to China are some of the lowest in 30 years.

Freight rates are up, but so is everything else connected with transporting grain domestically in Brazil. Over the past year, diesel fuel is up 15%, tires are up 12%, and labor is up 9%. Farmers will bear the increased cost of transporting their soybeans in the form of lower grain prices paid to the farmers.

According to the magazine Valor Economico, the cost of trucking soybeans from Sorriso in central Mato Grosso to the port of Santos, which is a little more than 2,000 kilometers, went from R$ 235 per ton in March of 2015 to the current R$ 300 per ton or approximately US$ 2.00 per bushel using an exchange rate of 4 Brazilian reals per dollar. The cost of transporting soybeans from Sorriso to Rondonopolis where the main rail terminal in the state of Mato Grosso is located, went from R$ 81 per ton to R$ 105 per ton (US$ 0.73 per bushel).

In addition to higher freight rates, new toll changes went into effect this year on highway BR-163, which is the major highway connecting Mato Grosso to the Port of Santos. A truck with nine axils hauling 800 bushels of soybeans to the Port of Santos will pay approximately R$ 2,000 in tolls (US$ 500) each way or approximately US$ 0.62 per bushel. All of these costs will be paid for by the farmers in the form of lower prices paid for their soybeans.

In contrast, the cost of transporting the soybeans from the ports in southern Brazil to China are some of the lowest in 30 years. In January of 2015, the cost to ship soybeans from southern Brazil to China was US$ 35 per ton. Today, that cost has declined to about US$ 18 per ton. Five or six years ago, the cost was US$ 60 per ton.