Mar 02, 2010
Lower Prices And Higher Freight Rates Squeeze Margins Of Brazilian Soy Producers
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Soybean harvest is in full swing across much of Brazil and farmers are not only concerned about the lower prices they are receiving for their crop; they are also very worried about the increased freight rates for moving their crop to the ports. In the municipality of Campo Novo dos Parecis in southwest Mato Grosso, a sack of soybeans (60 kilograms) is currently selling for R$ 28 compared to R$ 40 at this time last year (US$ 7.07 per bushel this year compared to US$ 9.09 last year).
According to the state Agricultural Economic Institute of Mato Grosso, more than 60% of the soybeans that leave the state of Mato Grosso do so via semi trucks on highway BR-163 and BR-364. The demand for trucks is so great this year that freight rates have increased significantly. According to the Soybean Producers Association of Mato Grosso, last year for every 50 sacks per hectare of soybean production, it cost the equivalent of 13 sacks per hectare to transport the crop to ports in southern Brazil. This year transporting the soybeans to the same ports is costing the equivalent of 23 sacks per hectare for every 50 sacks of production. Astonishingly, approximately 45% of the price he receives for his crop goes toward transportation to move the crop out of Mato Grosso.
In Lucas do Rio Verde in central Mato Grosso; farmers are not only having to put up with higher freight costs, but also disappointing yields as well. The Rural Syndicate in Lucas do Rio Verde estimates that the average yield in the municipality is 50 sacks per hectare or 3,000 kg/ha (43.5 bu/ac). This is down about 10% from last year when the municipality averaged 55 sacks per hectare or 3,300 kg/ha (47.8 bu/ac). They attribute the decline to increased disease and pest pressures as well as excessive rainfall during December and January. The combination of lower prices and higher transportation costs are putting a squeeze on potential margins for Brazilian soybean producers.
In the second leading soybean producing state of Parana the situation is better, but farmers are still seeing significant increases in freight costs. In the region of Maringa in western Parana, the freight rates have increased 25-40% this year compared to last year. This year it is costing about R$ 80 to transport a ton of soybeans from Maringa to the Port of Paranagua (about US$ 1.20 per bushel) compared to R$ 60 per ton last year (US$ 0.93 per bushel).