Record, early crops to boost Brazil freight

Grain freight rates in Brazil’s Mato Grosso state should reach peak demand in January and hold at high rates for longer than normal in 2022 amid expectations of a record crop of grains and oilseeds, coupled with an earlier-than-expected soybean harvest.

The optimistic outlook is rooted in a 3.7pc increase to 10.86mn hectares (ha) in planted soybean acreage in Brazil’s top farm producing state, according to the Mato Grosso Institute of Agricultural Economics (Imea). Production for the 2021-2022 season is estimated at 38mn t of oilseeds, 5.8pc higher than its estimate for the 2020-21 season and a volume that would be the largest in the history of the state.

Good weather conditions in this cycle have contributed to early planting, which consequently should result in the earliest harvest in the history of Mato Grosso. The soybean harvest in Mato Grosso usually happens between January-April, with the first month harvested volumes small. But since planting for the 2021-22 soy crop happened earlier, the harvest will also come earlier. Market participants expect the January harvest will be four times greater than the harvest in the same month last year.

With this, grain freight rates, which normally reach their highest levels at peak demand in mid-February, should reach higher levels in the first month of 2022. Argus provides weekly assessments for nine grain freight rates that originate in Mato Grosso. The destinations for these routes are the transshipment point for the Miritituba waterway, in the Northern Arc of Atlantic ports; the Rondonopolis railroad hub; the Palmeirante railroad terminal in Tocantins state; and directly to the ports of Santos and Paranagua.

Grain freight rates in December 2021 were as much as 50pc higher than the same period in 2020. The Sorriso-Rondonopolis route reached an average price of R125/t ($23/t), up by 42pc. The Sorriso-Miritituba stretch reached R210/t, up by 50pc. For 2022, the expectation is that grain freight rates will continue to rise, since demand should start the year on a strong footing.

In addition, with record production, the expectation is that the oilseed flow will take place for a longer period of time. This may lead to competition within the transportation industry with corn, which is planted later in the same fields, in the second half of 2022.

Another element that should contribute to the increase in grain freight is competition for trucks among the other producing states, such as Parana, Goias and Mato Grosso do Sul, since the harvest in these locations should also be advanced. Rates will have to be elevated to attract drivers.

In addition, the cost of vehicle maintenance: of spare parts and accessories, such as tires, and of diesel, will also contribute to higher grain freight rates compared with previous years. Market participants are also monitoring the possibility of trucker strikes in case of further increases in these costs. Throughout 2021 several strike attempts were made, but none proved very successful.

The 2020-21 season as a whole was hampered by weather problems. The soybean crop suffered from dry weather, which delayed planting and caused a late harvest. This also affected the second crop corn.

Argus Media

Tags: grain, Brazil, oilseeds, freight