Brazil's 2024 grain, ferts freights unusually low

The slow pace of farmer selling for Brazil's 2023-24 soybean crop and lower liquidity in the fertilizer market have contributed to lower demand for transport services in early 2024, also raising concerns about a possible logistical bottleneck.

Demand to transport grains in Brazil usually peaks in the first quarter — increasing freight rates — because of the soybean crop harvest. Works in the current cycle have proceeded at a satisfactory pace, despite climatic problems brought by the El Nino weather phenomenon. The harvest in Mato Grosso state — Brazil's largest oilseed producer — reached 95.6pc of planted areas by the week ended 15 March, only 0.9 of a percentage point below the previous harvest and 0.6 of a percentage point below the five-year average for the period, according to the state's institute of agricultural economy Imea.

But crop sales have been slow. Farmers in Mato Grosso sold 46.3pc of the 2023-24 soybean crop by early March, 5.9 percentage points less than in the previous crop and 19 points behind the five-year average for the period, according to Imea. Lower oilseed prices in the international market have encouraged producers to slow the pace of sales.

As a result, grain freight rates during harvest time fell — which is unusual for this time of year — on lower demand for transportation services. Freight rates on the Sorriso-Rondonopolis route, bound for the rail terminal in Rondonopolis, reached R153/metric tonne ($31/t) in the first week of March, from R200/t in the same period in 2023.

In the corridors towards Miritituba, in Para state, via the BR-163 highway to the waterway transshipment point, the Sorriso-Miritituba route was at R253/t in early March, from R315/t last year.

The Querencia-Palmeirante route, to Tocantins state and then via rail to the port of Itaqui in Maranhao state, reached R260/t in early March, from R335/t last year.

The Rondonopolis-Paranagua route, bound south, was at R338/t in the beginning of March, down from R390/t in the same period in 2023.

Demand for fertilizer freights was also unusually lower in the first quarter. At this time of year, farmers typically receive large volumes of fertilizers to attend to their soybean harvest and corn planting activities.

But the purchase of inputs was also delayed as farmers postponed crop sales. With lower liquidity in the nutrient market, demand for transportation services was also lower.

In Paranagua, freight rates to Rondonopolis reached R234/t in early March, from R276/t in 2023. Freight costs to Sorriso stood at R318/t, from R348/t in 2023.

Freight demand for routes originating in the Santos and Cubatao ports, in Sao Paulo state, and bound to Mato Grosso, was also lower. Freight rates to Sorriso reached R365/t in March, from R385/t a year earlier. Costs to Rondonopolis stood at R255/t in the period, from R280/t a year prior.

In the Northern Arc, trends on routes from Sao Luis, at Itaqui, were similar. The Sao Luis-Querencia route reached R260/t, from R336/t in the same period in 2023. The Sao Luis-Porto Nacional stretch stood at R202/t, from R249/t last year.

This scenario concerns market participants, as it could create a logistical bottleneck. Soybeans will need to be shipped for exports eventually. In parallel, fertilizers arriving in Brazilian ports will have to be delivered to the domestic market.

That could lead to increased competition for trucks and a significant increase in freight rates, as well as longer queues at ports for loading and unloading ships, raising the logistics costs.

By João Petrini

Grain freight rates - Rondonopolis-Paranagua R/t

Fertilizer freight rate - Sao Luis-Porto Nacional R/t

Fertilizer freight rate - Paranagua-Rondonopolis R/t

Grain freight rates - Sinop-Miritituba R/t