Dec 04, 2014

Mato Grosso do Sul has Storage for only 60% of its Grain Production

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

A lack of adequate grain storage continues to be a concern for Brazilian farmers. According to the Agriculture and Livestock Confederation of Mato Grosso do Sul (Famasul), the state is expected to produce 14 million tons of grain in 2014/15, but there is only storage capacity in the state for 8 million tons of grain (60%). The lack of storage forces many farmers to sell their grain at harvest when prices are generally the lowest and freight rates are the highest.

Of all the grain storage capacity in the state, 60% is at grain companies and agricultural industries, 25% is at cooperatives, and only 12% is on-farm. Only having 12% of the grain storage on farm in the state continues to be a primary concern in Brazil. By comparison, in the United States 55% of the grain storage is on-farm and 35% is on-farm in the European Union.

The Brazilian government is trying to address the problem through the Storage Construction and Modernization Program (PNA). The program was part of the 2013/14 Agricultural Plan and it is scheduled to invest R$ 5 billion per year for five years (R$ 25 billion total) solely for the construction of grain storage. The low interest loans have a generous grace period before the first payment is due and an extended period of time to pay off the loans. Results from the first year of the program have been disappointing with many participants complaining about the slow and complex bureaucratic process involved for the release of the money.

Part of the PNA program is directed at modernizing the storage facilities run by Conab. Many of the storage units under Conab's control are antiquated and in desperate need of repairs. In Mato Grosso do Sul, Conab has 12 storage facilities, but 4 of the facilities are closed due to structural defects. Conab recently announced that they plan to sell two of their facilities in the citities of Gloria de Dourados and Pedro Gomes.

A lack of storage facilities is not just a problem in Mato Grosso do Sul, it is a nationwide problem in Brazil. According to Conab, Brazil is expected to produce 200 million tons of grain in 2014/15 and yet the country only has the storage capacity for approximately 160 million tons (80%). The National Commission for Grain, Fiber, and Oilseeds recommends that Brazil should have the storage capacity for 20% more than the average grain production for the past five years.