September 4, 2012

Lack of Trucks Driving up Transportation Costs in Brazil

The summer rains are not expected to start in Mato Grosso for several more weeks, but grain elevator operators are becoming very concerned because they still have huge piles of corn on the ground exposed to the elements. The 2012 safrinha corn crop was nearly double the production in 2011 and many grain elevators were forced to pile the corn on the ground. They now need to get the corn shipped out before the hot and humid summer weather sets in, but they are having a difficult time contracting enough trucks to do the job.

The lack of trucks is being caused by new work rules imposed by the federal government that forces drivers to increase their rest times between driving hours. Even while they are driving, they are now forced to rest for half an hour for every four hours of driving. The result has been that drivers only want to do short hauls because they can make more money verses the very long hauls from Mato Grosso for example where they would typically lose money.

Even if they can find trucks, the freight rates have skyrocketed since these new rules have been put in place. For example, a grain elevator in Campo Verde, which is located in southern Mato Grosso, usually ships out 50 truckloads of grain per day this time of year, but this year, they are loading less than 30 trucks per day. The shortage of trucks has resulted in freight rates jumping 40% in just the last month and overall, rates are 25% higher than last year. In August of 2011, the freight rate was R$ 200 per ton and this year it has risen to R$ 250 per ton.

Grain elevator operators are not the only ones worried about the high costs of transportation. Cotton producers are also finding it difficult to arrange transportation and they are paying much higher rates when they can find the trucks. To transport a truckload of cotton (28 metric tons) from southern Mato Grosso to the Port of Paranagua, it is now costing R$ 7,000 per truck (US$ 3,500), or 27% more than the R$ 5,500 it cost last year.

The transportation problem in Brazil could get much worse next year when the soybean crop and safrinha corn crop are expected to be much larger. There is some progress being made on increasing rail and barge transport, but not enough to keep pace with the increasing production. In addition to the surface transportation problems, the chronic congestion at the Brazilian ports is also expected to get worse in 2013.