Jul 03, 2018

Freight Dispute continues to cause Havoc with Brazilian Grain Trade

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

Even though the truck driver strike ended a month ago, the grain trade is still dealing with the after effects. There still has not been an official confirmation of the new minimum freight rates for hauling grain to the Brazilian ports. The next meeting to deal with the freight issue at the Brazilian Supreme Court isn't scheduled until August 27th. The ongoing dispute continues to slow the movement of grain to the ports and the transportation of fertilizers from the ports to the interior.

The entire situation will soon become more complicated as the safrinha corn harvest gets underway with many grain silos still full of soybeans. A lot of these soybeans were sold when prices peaked back in April and May, but the delivery of those soybeans to the Brazilian ports are being delayed as well.

According to the new rate that the government agreed to in order to end the truck driver strike, the cost of transporting a ton of soybeans the 600 kilometers from the city of Cascavel in western Parana to the Port of Paranagua went from R$ 120 per ton (approximately $0.87 per bushel) to R$ 180 per ton (approximately $1.31 per bushel).

As a result, both the freight companies and the independent truck drivers have greatly reduced their activities. A freight company in western Parana indicated that their daily load volume went from 300 per day before the strike to 60 per day after the strike, or a reduction of 80%.

Instead of running the risk of being fined for paying the old freight rate, many companies have decided to reduce their operations until the dispute is settled. Independent truck drivers are also feeling the pain by not having any loads to generate an income.

Brazilian farmers are being squeezed from both ends and they are concerned that the higher freight rates will increase their cost of production by driving up the cost of transporting fertilizers and other inputs. Additionally, the higher freight rates could also drive down the prices grain companies are will to pay for the grain.