November 19, 2014

Only 13.6% of Brazil's Grain Storage Capacity is Located On-Farm

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

As Brazil's agricultural production continues to expand, the construction of new storage space has not been able to keep pace making a deficit of grain storage a critical shortcoming in the Brazilian infrastructure. A particularly glaring shortage is the fact that only 13.6% of Brazil's total storage capacity is located on-farm.

The lack of on-farm storage forces many farmers to sell their grain at the time of harvest when prices are generally the lowest and freight rates are generally the highest. Additionally, the movement of most of the grain into the commercial market during a short period of time causes huge bottlenecks all throughout the transportation system.

This lack of storage was a key topic of discussing at a recent debate in the Agricultural Commission and Agrarian Reform committee (CRA) of the Brazilian Senate.

During the debate, a technical expert from the Agriculture and Livestock Confederation of Brazil (CAN) Alexandra Camara, presented data from a study they conducted that indicated that during the 2013/14 growing season Brazil produced 194.6 million tons of grain, but the country only had storage capacity for 149 million tons (76.5%). Additionally, the study indicated that only 13.6% of Brazil's storage capacity is located on-farm, which is much lower than the 55% that is on-farm in the U.S. and 35% in the European Union.

According to the National Commission for Grain, Fiber, and Oilseeds, the storage capacity of a country should be 20% more than the average grain production over the past five years and that on farm storage should be 50%. Obviously, Brazil is woefully short in both categories.

Part of the debate included discussion concerning the National Storage Plan, which is a five-year R$ 25 billion real program designed to loan money at low interest rates solely for the construction of new grain storage. The first year of the program got off to a rocky start with many participants complaining about the slow and complex bureaucratic process involved for the release of the money. It remains to be seen if funding for this program will be sustained for the entire five year period.