Brazilian Farmers Expecting Increased Logistical Problems in 2013

Many farmers in Brazil are expecting 2013 to be the worst year ever for logistical problems and freight costs. The freight costs are already rising in anticipation of a record large 2012/13 soybean crop and increased infrastructure delays. While farmers in Brazil continue to increase their grain production, the infrastructure of Brazil has not kept pace with the surging production. The Brazilian ports are already running at capacity, the highway network in Brazil has shown little improvement in decades, there have been a few more kilometers of rail lines constructed in Brazil in recent years but many times more are needed, one or two barging operations exist in Brazil but new barging operations have not gotten out of the discussion stage for decades. All this has led to worries that freight costs will surge again as the new soybean harvest starts in several weeks. In Mato Grosso, freight costs are expected to increase 20% in 2013 and average R$ 140 per ton (USD 70 per ton) to just transport soybeans from the fields of central Brazil to the rail terminal at Alto Araguaia in southeastern Mato Grosso. From there the soybeans still need to be transported to the ports in southern Brazil. This is on top of a 30% increase in 2012. According to the Mato Grosso Association of Soybean and Corn Producers (AprosojaMT), freight costs equate to approximately 30% of the price of the soybeans. If the price of soybeans is R$ 50 per sack, transportation costs are R$ 14 or R$ 15 per sack. That would be the equivalent of soybeans in the United States that are selling for $14.00 a bushel having freight charges of $4.20 per bushel. One of the primary drivers for increased transportation costs is the new legislation in Brazil that restricts the number of hours a truck driver may work in a 24-hour period. The new restrictions mean that a typical truck may be on the road 30% less per month due to a lack of drivers. Many independent drivers have already said they can no longer afford to do long hauls such as from Mato Grosso to the ports in southern Brazil because of the new regulations. This is critical for Brazil since more than 60% of the grain in the country is transported by truck. If there is a lack of truck transportation, there could be ripple effects for farmers and grain companies. A relatively small percentage of Brazil grain production is stored on the farm, so producers rely on commercial trucks to transport the grain from the field to the local co-op or grain elevator. If trucks are not available in a timely manner, than harvest progress could be impeded as farmers wait for trucks. Farmers and grain elevator operators are also concerned that they may have to pay penalties of 10% or 20% if they deliver late on their contracts due to a lack of trucks. The entire problem of inadequate infrastructure is of a particular concern especially in Mato Grosso where most of the grain is transported out of the state to processors or exporters in southern Brazil.