Photo of four grain bins in Brazil with truck in front. Embrapa, photo by Paulo Kurtz
Brazil plans to spend $8 billion to subsidize loans for new grain storage.

Brazil’s storage shortage limits farmer profits

Brazil will spend $8 billion to subsidize loans for new grain storage structures.

The miles-long lines of trucks at Brazilian ports during harvest season have shortened, but not Brazil’s overall need for more storage. Producers often end up being prisoners to glut-market prices.

Brazil’s chronic grain and oilseed storage problem remains stubborn according to a new report released by Conab, the storage and distribution agency of the Brazilian Agriculture Ministry.

Despite a shockingly-low (for Brazil) government-subsidized interest rate (just 7% a year) for the building of grain and oilseed storage structures, the country still can only manage to store just over 155 million tonnes of grains per year—chiefly in private-farm flat storage buildings—the kind where you use a front-loader to move the beans around. Off-farm storage for all grains and oilseeds comes to 2.3 million tonnes

A good deal from the government
Aside for the relatively low interest rates on loans for grain storage, those taking advantage of storage get no payments for the first three years, and then 12 years after that to close the debt.

Of course, the storage network doesn’t have to be able to handle everything all at once: The Southwestern Brazilian states have excess capacity in general because they work with coffee as well as corn and beans. And they know they’re going to have extra demand. But though occasional historic coffee booms have left them with lots of excess storage capacity, there just ain’t much soy or beans grown in those parts.

All the good storage in all the wrong places
Where the country urgently needs more grain storage capacity is farther north, in places like Mato Grosso, Tocantins, Bahia and Goias states. Producers in states like Mato Grosso, which produces some one-third of all Brazilian beans and a heckuva lot of second-crop corn produced 51.2 million tonnes of total grains and oilseeds in 2014-15 enjoyed just 32.3 million tonnes of storage capacity.

The problem gets worse in the yet-newer grain expansion areas, like the so-called Mapito region and Bahia state, where soy production has greatly outstripped both private and public grain storage investment.

The result is that a lot of producers have started to refer to the trucks they contract with at harvest time as “rolling storage.” Between travel times and waiting-to-dump times, they can get up to three days of harvest storage.

But we and they know that’s not the way to go. Being forced to sell at each annual market glut is tough, after all.

Private storage growing, but not enough
So Brazil has put forward a plan valuing about $8 billion dollars to subsidize grain and oilseed storage investment loans—to famers, co-ops and associations in high soy and corn production areas (remember the state of Rio de Janeiro that has all the storage for coffee but zilch soybean storage needs?) That program is slated to stretch until the 2017-18 year.

What Brazilian producers need are a lot more grain legs on their own operations—being able to take advantage of market rallies when they come up.

We’ll see if the powers that be extend that deal, and if any cash-strapped ag industry members have the money to get aboard.

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.

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