Brazil's grain, ferts freight rates drop on year

Brazil's grain and fertilizer road freight rates on routes monitored by Argus are expected to be lower in 2024 than last year, reflecting slow soybean and corn sales, which also contribute to decreased liquidity in the fertilizer market.

This results in lower demand for transportation services and has contributed to lower average freight rates in 2024. Sales of the 2023-24 crops in central-western Mato Grosso state, Brazil's largest soybean and corn producing hub, have been slow since the beginning of the year.

Soybean sales have only recently surpassed the previous cycle's pace, having lagged for most of the first half of 2024. Sales of the oilseed crop reached 84.3pc in June, up from 79.5pc last year, but below the five-year average for the period of 86.8pc. The soybean harvest in Mato Grosso was completed in April. Brazil exported 64.1mn metric tonnes (t) of soybeans by the end of June, more than the 62.8mn t in the same period last year, according to the economy ministry.

Corn sales reached 45.4pc of the total expected harvest, behind the 53.4pc recorded at the same time in the previous harvest and below the 72.2pc average for the period. Mato Grosso's corn harvest is well underway, with almost 90pc progress so far. Brazil exported 8.4mn t of corn as of the end of June, less than the 11.6mn t in the same period in 2023.

Demand for grain transport did not pick up despite the Brazilian real's weakening to the US dollar throughout the year, starting at R4.91/$1 on 4 January and reaching R5.53/$1 at the end of June — which boosts export sales — and the higher volumes exported. Low soybean and corn prices on the international market have not motivated producers and this is reflected in 2024 grain freight rates.

The average freight rate in the Sorriso-Rondonopolis stretch, bound for the rail terminal, was at R166/t ($30/t) in the first half of the year, down from R181/t in the same period in 2023. The Sinop-Miritituba route, which runs along the BR-163 highway to the waterway transshipment point, had an average rate of R249/t in the first half of 2024, compared with R279/t last year.

Average freight rates on the Querencia-Palmeirante stretch, bound for the rail terminal in Tocantins state and to the port of Itaqui, in Maranhao state, were at R237/t between January-June, down from R291/t in the first half of 2023. On the Rondonopolis-Paranagua route, towards the south, the average price in the first half of 2024 was at R341/t, down from R363/t in the same period last year.

The year-on-year context for fertilizer freight rates is very similar, with rates falling despite higher imports. Brazil imported 17.8mn t of fertilizers in January-June, a 6.6pc increase from the same period last year, according to the economy ministry. But freight rates have not reflected higher demand for transportation services.

In southern and southeastern ports, the Paranagua-Rondonopolis route reached an average rate of R225/t, down from R248/t in the first half of 2023. The Santos/Cubatao-Rondonopolis stretch reached an average price of R248/t in the first half of the year, from R271/t last year.

A similar trend occurred on fertilizer routes originating in the Northern Arc, the country's Atlantic-facing ports. Demand for transportation at Itaqui remains lower than in the same period in 2023. The Sao Luis-Querencia route reached an average of R279/t, down from R325/t last year. The Sao Luis-Porto Nacional stretch reached R217/t between January-June, from R240/t in the same period in 2023.

Coming months

But logistical costs for transporting grains, especially corn — which is being harvested — are likely to increase in the second half of the year.

Some freight rates are approaching their highest levels of 2024, because of the greater need for transportation. Additionally, corn is also meeting domestic demand from ethanol and animal protein plants, especially from farmers in the south. This increases competition for road logistics services and raises prices. Still, market participants said that freight rates are expected to reach the same levels as in 2023.

Fertilizer freight activity is expected to pick up in the second half of the year, as the purchasing window for the next crop approaches. But this higher demand has not yet been reflected in higher freight rates, with costs on the 31 routes monitored by Argus drifting in different directions.

Additionally, when the fertilizer begins to be delivered to producers, there is concern about logistical bottleneck at the ports, with the supply of trucks being insufficient to meet demand, causing stiffer competition for transportation services.

By João Petrini

Fertilizer freight rates BRL/t

Grain freight rates BRL/t