Sep 15, 2009
Brazilian Government Lowers Cost Of Diesel Fuel 9.6%
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian federal government announced last week that the cost of diesel fuel at Brazilian gas stations would be reduced 9.6%. The average cost of diesel fuel in Mato Grosso is expected to go from R$ 2.38 per liter to R$ 2.21 per liter ($4.63 per gallon to $4.30 per gallon using the rate of 1.95 reals per dollar). This is welcomed news for Brazilian farmers of course who consume huge amounts of diesel fuel in their farming operations. It is estimated that this
decline will save farmers about R$ 15 per hectare. This will be a direct savings for farmers because they purchase the fuel directly for their operations.
Another potential source of savings could be in lower transportation costs to move their products to market. Approximately 60% of the grain production in Mato Grosso for example moves to processors or ports via truck and the average distance to the ports from Mato Grosso is 2,000 kilometers (1,200 miles). The amount of savings on transportation costs are certainly going to be less than 9.6% because the trucking companies are not going to pass on all the savings. The truckers have been complaining for a long time that their margins have been squeezed due to high fuel costs. If fuel cost come down slightly, they are more likely to pocket most of the savings instead of passing it along to the farmers.