Brazil freight costs likely to rise up to 10 percent this crop year

By: | at 09:04 AM | Maritime  

Freight costs in Brazil’s grain belt will likely rise up to 10 percent in the 2013/14 crop year now under way due to higher diesel fuel prices and a strong demand for trucks amid a record soybean harvest.

The expected increase comes on top of last season’s high shipping costs, buoyed by a new law that limited the amount of time truck drivers could be on the road.

“The main problem is the availability of trucks,” said Natalia Trombeta, a researcher for Esalq Log, the logistics entity of the University of Sao Paulo’s agricultural school.

She said she expected prices to rise by 10 percent, about the same amount that Brazil’s soybean output is expected to increase from last year’s record crop.

State-run oil company Petroleo Brasileiro SA also approved three increases in the price of diesel in 2013.

Freight costs peaked last year between March and April, but Esalq believes prices could hit seasonal highs earlier this year. Farmers have favored planting a faster growing soybean variety this year, giving them time to plant another crop of corn, cotton or even more soy.

In March 2013, freight costs from the top soy growing state of Mato Grosso to Santos on the coast of Sao Paulo state rose 35 percent from a year earlier to 305 reais ($129) per tonne.

International trading firms who buy grains locally in Brazil, rather than farmers, suffered the consequences of this unexpected cost. The National Association of Cereal Exporters estimated a loss of $2.5 billion for the sector in 2013.

“The expectation is that there will not be the same inflated prices as last year,” said Aedson Pereira, an analyst at Informa Economics FNP. He said prices would rise between 5 and 10 percent, noting there is slightly less demand for Brazil’s crops given stronger harvests in the United States.


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