August 22, 2017

Freight Rates in Brazil Increased 20-40% over Past Month

Freight rates in Brazil are determined largely by supply and demand. When the demand for freight increases, so to do the freight rates. That scenario has played out again recently as freight rates have increased 20-40% in little more than a month.

The reason for the increase is the demand to move a record large safrinha corn crop from states like Mato Grosso to Brazil's ports. The cost to transport a ton of corn from Sorriso in central Mato Grosso to the Port of Paranagua in southeastern Brazil was R$ 230 per ton in June (approximately $2.00 per bushel). The rate in early August jumped to R$ 275 per ton or approximately $2.40 per bushel.

These high freight rates are making Brazilian corn less competitive in the world market especially since the exchange rate between the Brazilian real and the U.S. dollar is not very favorable. The Brazilian currency is currently trading at approximately 3.17 to the dollar, which is stronger than it was several months ago.