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March 4, 2011

Concentrated Harvest Increasing Freight Costs in Brazil

The heavy rains in central Brazil are not only causing harvest delays and quality concerns for the soybeans that have yet to be harvested; they are also resulting in higher freight costs as well. The rain delayed soybean harvest in Mato Gross is resulting in a more concentrated harvest season in the state as well as pushing the bulk of the harvest into the month of March which is normally the peak harvest month for soybeans in Parana.

In a normal year, trucking companies in southern Brazil send extra trucks to Mato Grosso during the month of February to aid in the harvest and then recall those trucks back south in March to help with the harvest in southern Brazil. This year though, few soybeans in Mato Grosso were harvested during February and now the two biggest soybean producing states in Brazil are harvesting at the same time and there are not enough trucks to meet the demand. In 2010 more than half of the soybean crop in Mato Grosso was harvested before the end of February, but this year less than a quarter of the crop had been harvested by the end of February. The result has been higher freight rates in both states.

Freight rates in Mato Grosso have risen 10% to 15% compared to last year and in Parana they have risen as much as 25%. The cost of transporting a ton of soybeans from Rondonopolis, which is located in southern Mato Grosso, to the Port of Paranagua in southern Brazil is approximately R$ 145 per metric ton or about US$ 2.36 a bushel, which is 11.5% more than last year. Trucking soybeans out of central Mato Grosso is even worse. In Sorriso, which is located in central Mato Grosso, it is going to cost approximately R$ 215 per metric ton or about US$ 3.50 per bushel to get the soybeans to the Port of Paranagua.

Freight rates year-on-year usually increase 5% to 10%, but since they are harvesting at the same time in both Mato Grosso and Parana, rate increases this year have been exceptionally high.