Jan 06, 2025
Brazil Struggles With Storage Deficit, 15% of Storage Is On-Farm
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Brazil continues to struggle with inadequate grain storage for its expanding grain production according to Cristiano Oliveira, Head of Research at Rivool Finance. In 2010, Brazil had the capacity to store 91% of its grain production, but that declined to 60% in 2023.
The Food and Agriculture Organization recommends that countries have storage capacity equivalent to 1.2 times their annual grain production. Countries such as the United States and Canada have 54% and 80% of their storage capacity on-farm respectively, whereas Brazil has only 15% of its storage capacity on-farm.
Mato Grosso is the largest grain producing state in Brazil and it has the capacity to store only half of its grain production. This forces producers to sell during harvest when freight rates are high and prices face downward harvest pressure. The situation is expected to get worse when farmers start harvesting the 2024/25 crops. Conab is expecting Brazil to produce a record 322 million tons of grain in 2024/25, which is up 8.3%.
The one advantage Brazil has is that the soybean and corn harvests by in large do not occur at the same time. The soybeans are harvested in January-February-March, whereas most of the corn is harvested in June-July-August. Even with the offset in harvests, investments in on-farm grain storage would allow farmers to save on freight rates and sell their crops at more favorable prices.
The grain storage sector in Brazil will need billions of dollars of investments to just keep pace with the expanding production much less to close the gap in the storage deficit. The Brazilian government provides credit for the construction of storage units but producers and grain companies complain that there is too much bureaucracy associated with the loans.