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May 23, 2018

Initial Impact of Truck Strike on Brazilian Agriculture Sector

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

Independat truck drivers in Brazil entered into their second day of protest against high fuel prices on Tuesday by blocking highways in 19 Brazilian states. They are upset about the sharp increase in diesel prices in recent months and as a result, they want the government to reduce some of the taxes imposed on diesel fuel.

The protest has only been ongoing for two days, but it has already had an impact on the meat sector in Brazil. Meat processing facilities depend on a daily influx of live animals to keep their operations up and running. A spokesperson for the Brazilian Association of Animal Protein (ABPA), which represents 140 agricultural related industries, stated that the blockages are impeding the transportation of chickens and hogs to processing facilities as well as the delivery of animal feed to producers.

Some meat processing facilities have already cut back on production due to a lack of live animals. The blockages have also delayed the delivery of refrigerated meat products to domestic retail locations as well as export facilities. Exporters are especially concerned about the increased costs if export shipments must be reprogramed due to a lack of product.

The delivery of grain to Brazil's export facilities is also being interrupted, but exporters say they have enough grain on hand to continue loading vessels. At the Port of Paranagua for example, they normally receive about 2,000 trucks per day loaded with soybeans at this time of the year, but on Monday, they received about 300 trucks.

Grain deliveries to the Port of Santos, Latin America's largest port, were also interrupted yesterday by protestors. A spokesperson for the Brazilian National Association of Grain Exporters (Anec) indicated that the protests have interrupted grain delivers to the ports, but there has not been any impact as yet on vessel loading. He also reiterated that the Port of Santos receives a significant portion of the incoming grain shipments via rail, which has not yet been impacted by the protests.

In the interior of Parana, one soybean crusher is warning that they may suspend operations due to the protests.

The spokesperson for the Grain Exporters stated that they want a resolution to the protests as quickly as possible. Brazil produced a record large soybean crop in 2017/18 and they are expecting to export a record amount of soybeans in 2018. Brazil is the largest soybean exporter in the world and this the peak time for soybean exports.

The president of the Soybean and Corn Producers Association of Mato Grosso indicated that 30% of the 2017/18 soybean production in the state has not yet been shipped out of the state. He indicated that the soybeans must be shipped out as soon as possible in order to free-up storage space for the safrinha corn which will start to be harvested next month.

Trucks transport approximately 56% of the goods in Brazil and independent drivers account for the majority of the truck transport. The president of the Brazilian Association of Truck Drivers claims to represent 700,000 independent truck drivers.