24/12/23
Viewpoint: Brazil may face road bottleneck in 1Q
Sao Paulo, 23 December (Argus) — The Brazilian soybean harvest and fertilizer
deliveries for the country's 2024-25 second corn crop will likely drive
first-quarter grain and fertilizer road freight rates higher. Grain freight
rates have been unusually low in 2024 because lower international soybean prices
discouraged producers from doing business in most months. But market
participants expect greater demand for transportation services in export
corridors in 2025, as an expected record 2024-25 harvest combines with a US
dollar that has strengthening against the Brazilian real, driving export demand.
Brazil will produce 166.2mn metric tonnes (t) of soybeans in the 2024-25 cycle,
an increase of almost 13pc from the previous season, according to national
supply company Conab's third official estimate for the cycle. The 2024-25
soybean harvest in Mato Grosso state — Brazil's largest producer — will total
44mn t, also 13pc above 2023-24 production, according to the state's institute
of agricultural economics Imea. Mato Grosso's soybean planting pace for 2024-25
has fluctuated significantly over the growing season, initially advancing slowly
because of dry weather, and then speeding up once rains returned. Planting was
complete on only 25pc of the almost 12.7mn hectares (ha) expected for the cycle
by 18 October, less than the 60pc reached at the same time in 2023 for the
2023-24 cycle. But planting increased by 68.6 percentage points in the following
three weeks, totaling 93.7pc by 8 November. As a result, more than half of the
soybean planted area in Mato Grosso was carried out in the same three week
period. That raises concerns among market participants about high competition
for export transportation and available vehicles when all those crops become
ready for harvest at the same time, resulting in a logistical bottleneck. Market
participants expect lower freight rates for exports during the 2024-25 second
corn harvest, set to take place in the second half of 2025. Demand from the
Brazilian domestic market will remain at a consistently high level, especially
from ethanol units, whose demand for corn was high in 2024, as prices carried a
premium to the export market, and also contributed to lower export volumes. This
should lead to lower grain freight rates during the second half of 2025, with a
significant portion of grain destined to meet the Brazilian industry's needs.
Corn ethanol production in Brazil is expected to total 7.2bn liters (124,865
b/d) in the 2024-25 cycle, a 22pc increase from 5.9bn l in the previous cycle,
according to Conab. The company projects that 1t of corn can produce around 400l
of ethanol, which means that approximately 18mn t of corn will be consumed by
the ethanol industry. Brazil is expected to produce around 86.2mn t of animal
feed in 2024, 2.3pc more than it did in 2023, according to the sector's national
union Sindiracoes. This should stimulate demand for about 55mn t of corn for all
animal feed production expected this year. Animal feed production is expected to
grow further in 2025 to 87.8mn t. Ferts freight rates may also increase
Fertilizer transportation may face logistical bottlenecks to move inputs from
ports to crops in early 2025 because of the slow pace of fertilizer purchases,
especially nitrogen, for the 2024-25 second corn harvest. With the purchase
window coming to a close by the end of December, market participants estimate
that these nutrients have to arrive at Brazilian ports by early January, so that
they can be transported in time for application during the grain harvest. That
may also increase competition for vehicles in the first quarter of 2025,
especially in January, when the supply of trucks is reduced following
end-of-year festivities. Under these circumstances, higher fertilizer freight
rates and higher costs for road logistics are expected. By João Petrini Send
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