Brazil’s Growing Pains
- Published on Thursday, 08 August 2013 20:45
One of the United States' largest competitors in global grain sales, Brazil, has continuing storage limitations that reduce its flexibility in international marketing. This past year, Brazil exported an estimated 21 million metric tons (827 million bushels) of corn alone, benefiting from the U.S. drought that drove up cost of U.S. corn in the global market.
Brazil has a current storage capacity at an estimated 145 million tons with an expected harvest of 188 million tons of grains The Food and Agriculture Organization recommends an adequate storage capacity at 120 percent of production volume, which means Brazil is lacking 80 million tons of grain storage.
Even though Brazil has set aside $30 billion to build warehouses over the next six years, there will still be a shortage of space in the short run. According to the U.S. Grains Council, two additional factors aggravate Brazil's storage problems.
FIRST: There is a lack of transportation infrastructure which results in a saturation of the Ports in the Southeastern and Southern regions. From January to May 2013 these ports exported an estimated 93 percent of the total corn and 86.9 percent of total soybean exports. If the Ports of the Northeastern and Northern area exported more grain, the storage shortfall in producing areas would be at least partially relieved.
SECOND: 65 percent of the existing storage capacity is located on the coast, while most of the new production areas are in the center of Brazil. These new production areas are severely limited in the amount of storage they have available. Mato Grosso, in western Brazil, currently expects a 40 million ton harvest of corn and soybeans, and has only 30 million tons of storage space available.
"The United States possesses good infrastructure and adequate storage space for its grains," said Erick Erickson, USGC director of global strategies. "It is one thing to be able to grow the corn, but it is another to be able to handle the supply properly, which is where the United States holds a clear advantage."