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February 23, 2016

Large Lineup of Vessel in Brazil Waiting for Soybeans

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

As a record large soybean crop in Brazil starts to move into position for export, there is a growing lineup of vessels waiting for the grain. As of late last week, there were 163 vessels waiting at Brazilian ports to load 9.7 million tons of grain. The vessels are waiting to load 7.5 million tons of soybeans and 2.2 million tons of corn. The lineup is more than double that of last year at this time when 66 vessels were waiting to load 4.1 million tons of grain. At the Port of Paranagua the wait time to load is now 50-60 days compared to 20 days last year at this time.

For the last five months, corn has dominated the exports from Brazil, but that is expected the change as the calendar changes to March. The large lineup of vessels is partially due to recent wet weather in southern Brazil that has delayed early soybean loadings. It's raining nearly every day in southern Brazil and loading operations are suspended when there is rainfall. Unfortunately, the forecast continues to look wet for southern Brazil for the next two weeks.

From March forward, soybeans will dominate the exports from Brazil for the next 5-6 months. Further rain delays in southern Brazil could persuade some exporters to look to the U.S. for their soybean supplies instead of enduring what is certain to be a very long waits in Brazil.

The two main ports in southern Brazil, Santos and Paranagua, have made significant improvements to their infrastructure in recent years, so once the weather turns dryer, loading operations should proceed at a record pace.

Additionally this year, more soybeans will be exported through Brazil's "Northern Arc" of ports relieving some of the pressure on the southern ports. Five years ago, only 5% of Brazil's grain exports moved through the northern ports, but that increased to 20% in 2015 and it will continue to increase in the years ahead.

Potential Problem for Brazil's northern ports - A potential temporary roadblock to further expansion of Brazil's northern ports occurred last week when the Public Ministers for both the Brazilian Federal Government and the State Government of Para asked a judge for an immediate suspension of the environmental licenses issued to three grain companies currently in the process of building barging operations on the Tapajos River at the port of Miritituba.

The Ministers contend that the environmental licenses, which are required to build the facilities, were granted in error by the equivalent of the EPA for the State of Para when they should have been issued by the Federal Government's equivalent of the EPA (Ibama). The environmental licenses were issued for one facility at a time and the ministers feel that all the proposed projects in the region including: new ports, barging operations, mineral extraction, hydroelectric dams, railroads, and highways should be judged collectively as to their potential environmental and social impact on the Tapajos River Basin as a whole and not judged individually.

They are also concerned that the potential impact on traditional indigenous communities in the region were not considered when the licenses were issued. If the judge agrees with the ministers, it could open up a real "can of worms" that could result in significant delays in the completion of these projects in northern Brazil.

I would consider this another example of the cumbersome bureaucracy in Brazil especially when it comes to such things as: environmental regulations, labor laws, worker rights, indigenous rights, etc. etc. Nothing is ever clear cut in Brazil and there always seem to be additional obstacles that must be overcome in order to get anything done in Brazil.