Nov 21, 2013

Brazilian Farmers Contracting Trucks for Next Harvest Season

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

Farmers in Mato Grosso are anticipating a shortage of trucks early next year when they start to harvest what is expected to be a record large soybean crop. As a result, many farmers are already contracting with trucking companies to insure they have enough trucks to keep the combines rolling.

Soybean production in Mato Grosso in 2013/14 is expected to be 25.6 million tons or 8.5% more than last year according to the Mato Grosso Institute of Agricultural Economics (Imea). The increases is the result of a 4.8% increase in acreage up to 8.2 million hectares and a yield increase from 50 sacks per hectare in 2012/13 (3,000 kg/ha or 43.4 bu/ac) to 52 sacks per hectare (3,120 kg/ha or 45.2 bu/ac).

The ultimate cause of the transportation problem is the lack of on-farm storage for the crops in the state. Without on-farm storage, the soybeans must be immediately transported to local co-ops or grain companies as soon as they are harvested. If there is a lack of trucks, the harvesting must stop until more trucks become available. Therefore, farmers in the state are already contracting with trucking companies to insure they have enough trucks available when the harvest pace picks up during the second half of January.

Even with tucks under contract, there is no guarantee that the trucks will be able to unload the soybeans in a timely fashion at the local grain elevator. The planting period was very concentrated this year, so the harvest season will be concentrated as well. It is entirely possible that the trucks will get caught in long lines at the grain elevator thwarting the farmer's efforts to continue harvesting their crop without interruption.

Farmers in the past have not constructed adequate on-farm storage due to a lack of credit. Many soybean farmers in Mato Grosso obtain their production loans from the multinational grain companies and they pay off the loans by delivering soybeans to the grain companies after harvest. These companies are in the business of storing and moving grain so they had no interest in loaning money to farmers to construct their own storage units.

To help alleviate this problem, the government has set up a line of credit for farmers to borrow money specifically for the construction of additional on-farm storage facilities. The first instalment of this five year R$ 25 billion program has just been made available, but it is coming to close to harvest to make much of a difference this growing season.

Even though farmers are contracting trucks months before the harvest will begin, freight rates are expected to increase significantly next harvest season. During the peak of the export season (March-April-May) it may cost more than three dollars a bushel to move soybeans by truck from central Mato Grosso to export facilities in southern Brazil.