El Niño to ‘funnel’ demand for freight in agriculture

The El Niño effect has delayed soybean planting in Brazil’s Midwest, the region that concentrates soy production in the country, potentially reducing the window for second-crop corn planting. This is expected to further focus on road freight demand, leading to increased transportation costs.

According to the Research and Extension Group in Agroindustrial Logistics at the Luiz de Queiroz College of Agriculture (EsalqLog), road freight prices at the beginning of next year are projected to be 15% to 20% higher than those in the same period of 2023. With the harvest delay, transportation costs are expected to peak between late February and early March rather than the usual early February timeframe.

“This will obviously depend on the region, but there will be a greater concentration of trucks leaving the farms during this period,” says Fernando Bastiani, one of the coordinators of the EsalqLog survey.

The El Niño caused excessive drought in the Midwest region, preventing soybean planting work. In the country’s South, the climatic phenomenon led to excessive rainfall, hampering Rio Grande do Sul and Paraná crops.

According to EsalqLog studies, on one of the country’s most important routes, the road between Sorriso and the Rondonópolis railway terminal, the cost per ton will reach R$ 210 in February and, in March, drop to an average of R$ 168.70. In February 2023, the average was R$ 178.

From Sorriso to the port of Miritituba, the cost per ton is expected to reach R$ 317.27 in February, the same value as in February of this year. In the following month, the value will likely drop to an average of R$ 287.03.

In regions where the harvest occurs later, the highest value is projected to be recorded between late March and early April. EsalqLog calculates that the average freight price between Luís Eduardo Magalhães and Salvador, both cities in Bahia, will be R$ 242.50 in April—compared to R$ 206 in April 2023—and R$ 244 in May.

The later-in-the-year soybean harvest will have consequences for the corn market, not only because the ideal corn window is likely not to be respected but also because this delay in corn will pit grain traders against sugar and ethanol mills for trucks. “The impact will only be smaller if the delay in corn cultivation causes significant productivity losses and reduces the harvest,” says Bastiani.

It is still early, but some point out that the winter corn crop could be 118.5 million tonnes. In the last cycle, the harvest totaled 131.9 million.

For Thiago Péra, coordinator of EsalqLog, what could alter this scenario is an increase in heavy vehicle sales in the country if interest rates continue to fall. “If this happens, there will be more freight supply in the medium term, and prices may be lower,” he says. “Changes in diesel pricing also affect the sector, increasing or reducing the vehicle supply,” he adds. Diesel represents approximately 65% of the cost of the operation of an independent truck driver.

Péra concluded by expressing his concern about the effects of the El Niño on the country’s transportation infrastructure, particularly for exports. Rains can jeopardize the operational capacity of ports as well as road access to them.

Source: Globo Rural

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