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March 1, 2017

Loses for Everyone Involved with Highway Problems in Brazil

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

Torrential rains along the unimproved sections of highway BR-163 in northern Brazil has stranded thousands of trucks carrying soybeans to ports on the Amazon River. Approximately 150 kilometers of the highway are not asphalted and it remains essentially a dirt road. Heavy rains in mid-February turned sections of the roadway into a giant mud hole. The Brazilian army was called in over the weekend to help fill in some of the mud holes, at least temporarily. The army is also assisting truck drivers and motorists, some of which who have been stranded for several weeks along the roadway.

Officials are hopeful that some truck traffic could resume by later this week. In the meantime, the problems along highway BR-163 are resulting in loses for everyone involved - the trucking companies, the exporters, the ports, and the farmers in Mato Grosso.

The problems along the highway could not have come at a worst time because this is the peak of soybean harvest in northern Mato Grosso. This is when tucking companies are the busiest and when they can charge the most to haul soybeans, but with thousands of trucks parked and unable to head north on BR-163, trucking companies estimate they have already lost R$ 50 million and counting.

Exporters at various ports on the Amazon River say they are losing R$ 400,000 per day in demurrage charges because they do not have enough soybeans to load vessels. They will not be able to resume loading until the highway is reopened and their supplies of soybeans are restocked. The ports are losing money as well due to the slow pace of loading.

Farmers in Mato Grosso are losing money because the grain company silos are filling up and they do not have additional storage space for more soybeans. Therefore, they have lowered the prices paid to the farmers because some elevators really don't want the soybeans. In extreme cases, some farmers may have to slow their harvest pace putting some unharvested soybeans at risk from wet weather.

Over the past seven days, the domestic price of soybeans has declined up to 7% in some interior locations in Mato Grosso. During the past week, soybean prices in Brazil have declined from R$ 1 to R$ 5 per sack ($0.15 to 0.75 per bushel). Domestic soybean prices in Brazil range from R$ 55.50 per sack in Campo Novo do Parecis in Mato Grosso to R$ 69.00 per sack in Ponta Grossa, Parana (approximately $8.13 to $10.10 per bushel).

These declining prices and logistical issues have put pressure on farmer selling in Brazil. Selling has dried up over the last few weeks as farmers hope for improved prices.