September 1, 2015

Grain Production in Brazil Increasing Faster than Storage Space

As the total grain production in Brazil increases, the country continues to struggle with inadequate storage space for all the production. Conab is estimating that Brazil will produce 208.8 million tons of grain in 2014/15, but it only has space to store 155 million tons, resulting in a storage deficit of 53 million tons.

The vast majority of grain storage in Brazil is in private hands with only 2.3 million tons of public storage. The reason why Brazil can get by with such a large storage deficit is because it harvests its two main crops of soybeans and corn at different times of the year. Brazil's soybean crop is planted during September, October, and November and harvested during January, February, and March. The safrinha corn is now the main corn crop in Brazil accounting for approximately 65% of the total corn production and the safrinha corn is planted during January, February, and March and harvested during June, July, and August.

Even with the spread out harvest seasons, there are still storage problems especially in the agricultural expansion areas. The state of Mato Grosso is expected to produce 51 million tons of grain and there are only 32 million tons of storage capacity in the state. The biggest storage problem in the state occurs when the safrinha corn is harvested during June and July and some of the silos are still filled with soybeans. It is now common in Mato Grosso to see piles of corn stored in the open air due to a lack of storage. The months of June and July are generally very dry in Mato Grosso, so storing the corn outside is not a major concern. Those piles though must be picked up by the time the summer rains begin in September.

The lack of storage is an even bigger problem in the northeastern states of Maranhao, Tocantins, Piaui, and Bahia where agricultural production has been expanding in recent years. This region generally lacks the infrastructure needed to store and move the grain in an efficient manner.

The federal government realized that the lack of grain storage is a significant problem and in 2012/13, they launched R$ 25 billion program to increase the grain storage capacity in the country. A line of credit was established for the Storage Construction Program which was to be loaned out at the rate of R$ 5 billion per year for five years until 2017/18. The subsidized interest rates on the loans was set at 7% with a three year grace period until the first payment was due and 12 years to pay off the loan. The program has not met its initial goals as yet due to environmental and bureaucratic obstacles.