A report by Rabobank reveals that Brazil’s agribusiness logistics system is under severe pressure due to increased transport costs and rising export volumes.
The report, published by the bank’s Food and Agribusiness Research and Advisory team, says that “2013 is likely to be a difficult year for agribusiness logistics in Brazil”.
The bank highlights three factors affecting the cost of transport in the country: growing export volumes for major commodities, rising diesel process and new legislation that impacts the country’s truck drivers.
“Despite current construction projects to improve Brazil’s transport and exporting capacity, virtually nothing can be done to alleviate the current pressure on the system in the short term, or to prevent it from intensifying,” says the Rabobank report.
Experts are predicting record corn and soybean crops this spring, but delays in getting the goods to port, coupled with increased road freight costs are having a dramatic effect on the bottom line.
Delays are as a result of a new Brazilian law which requires truck drivers to rest 30 minutes every four hours, with a minimum of 11 hours rest a night. According to reports, the new rules are causing congestion at ports.
“The new legislation on truck drivers’ working hours has had a substantial impact on commodity transport costs. The challenge for transport companies is maintaining the flow without having to acquire many more vehicles and find many more drivers,” says Rabobank analyst Andy Duff.
This is compounded by the rise in the price of diesel of more than 10% in the space of three months.
Even though commodity prices are high and margins favourable, trading companies have had to absorb much of the increases in transport costs this year, says Rabobank.
In the case of soybean and corn producers, “the expectation of higher costs next season is likely to be passed back to farmgate prices via the prices that trading companies offer for contract soybean purchases from farmers” the report says.
For cane and sugar, which is largely sold free on board, the increase in costs has to be absorbed by millers, adding to their financial woes brough about by the current international surplus of sugar