December 2, 2015

Brazilian Farmer's Innovative Solution to Lack of Grain Storage

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

Brazilian farmers continue to increase their grain production faster than the country can build the storage facilities needed to store the grain. The National Agricultural Confederation of Brazil estimates that Brazil has a deficit of 30% in its grain storage capacity. The Institute of Agricultural Economics of Sao Paulo indicated that the deficit is due in part to the fact that less than 20% of Brazil's storage facilities are on-farm. The deficit is even more worrisome when you consider the different types of grain being produced such as organic, GMO, and non-GMO which all must be stored separately.

Several groups of farmers in the state of Parana have developed an ingenious way to address this problem. They have joined together to build their own collective storage facilities. It is like having on-farm storage, but in cooperation with your neighbors and at a centralized location. These facilities are only for storage and individual members still retain the right to market the grain any way they see fit. The system is an alternative to the traditional agricultural cooperative where farmers can pay to store their grain, but then they must market the grain through the cooperative.

The first such facility was built ten years ago in the city of Palotina in the state of Parana. Fourteen farmers joined together to build the original facility which had the capacity to store 16,000 tons of grain. It has since been expanded to hold 25,000 tons. A second group of eight farmers in the same city built a second such facility in 2013. They invested R$ 8 million in a facility that could store 20,000 tons of grain.

In addition to paying to build the original facility, each farmer pays his percentage of the cost to operate and maintain the facility. This arrangement is very advantageous for farmers who individually would not have the ability to build on-farm storage. This collective arrangement is also probably a better way to keep the stored grain in good conditions and to help avoid problems with insects, fungal diseases, etc.

The Brazilian government has tried to address the problem of a lack of storage capacity by developing a low-interest loan program specifically designed to increase the country's grain storage capacity, but the results thus far have been disappointing due to numerous bureaucratic hurdles.