It is well known that Brazilian agriculturists are beating their own records year after year. It is claimed by the Brazilian Ministry of Agriculture that in the last 40 years, the national agricultural production increased about 386%[1]. This overwhelming growth is supported by two main factors: the incessant expansion of the harvested area and the consistent increase in productivity. As a consequence, the expectation for the next years is of even more growth.
According to the ‘Agribusiness Projections, Brazil 2018/2019 to 2028/2029’ (Projeções do Agronegócio, Brasil 2018/2019 a 2028/2029[2]), result of a joint effort between the Brazilian Ministry of Agriculture and Embrapa, the total grains production will grow 26.8% in this period, going up from 236.718 million tons in 2018/2019 to 300.121 million tons in 2028/2029.
However, despite the huge success in terms of production, the agriculturists and the logistics industry are facing massive difficulties when it comes to storage and transport of the harvested grains. Among the issues raised by the agriculturists, the insufficiency and deterioration of warehouses, the poorly maintained highways and the lack of multimodal solutions or terminals are between the most common.
This year, the reliance on road transport has already affected several soybean and corn producers and cooperatives, who are struggling with the transport deficiency for distributing their soybean crop. The logistics inefficiency coupled with the production increase is making the production flow more difficult each year.
The following images show the current condition of different silos and warehouses in the state of Mato Grosso – which is responsible for producing 28.2% of the soybean, 31.6% of the corn and 66.2% of the cotton harvested in Brazil[3].
In face of the lack of space for storing the corn crop, grain producers have no other option but jeopardizing the quality of their harvest by storing the grains outside.
As the infrastructure has not followed the pace of the production growth, this scene is becoming more common every year: one crop competing with the other for storage and transport logistics.
In accordance with a recent bulletin issued by the Brazilian National Transport Confederation (boletim Economia em Foco, CNT[4]), the investments in transport infrastructure made by the government in 2019 were the lowest in 12 years, representing 0.14% of the Brazilian GDP. Meanwhile, as per the above quoted Projection, the grains production is expected to grow around 2.4% per year in the next ten years.
The images above not only reveal the necessity of urgent infrastructure developments, but unfortunately may also dictate a future tendency from which potential cargo claims may arise.
Potential risks – wet and insects damage
In this case and in many others, the lack of static storage capacity, mainly triggered by the increased production and the logistics overload, compels the grain producers to take the risk and expose the crop to humidity and insects.
Due to the constant advance of the deforestation in the Amazon Rainforest and the removal of Cerrado vegetation, where today the productive frontier is expanding[5], the rain regime is becoming more irregular every year, not excluding the possibility of occasional rain even in dry seasons (post-harvest).
Besides the risk of wet damage, it is equally important to mention that when the grains are stored outside, the non-dried and non-fumigated cargo obviously becomes a great target for insects and pests. The aforesaid expansion of the productive frontier coupled with the harvesting of the areas forces insects to seek alternatives to feed.
When grains are duly stored in silos or warehouses, they usually pass through a drying process[6] [7], in which the moisture content is reduced to a suitable level for safe storage, maintaining the quality and marketability of the grains. Not only that, but drying the grains also retards the decomposing process, which is responsible for generating flammable vapors, as methanol, propanol or butanol – generated when the grain moisture is above 20%. Therefore, depending on the state of decomposing, wide variations of temperature, pressure and humidity, which are typical of maritime transport, increase the risks of spontaneous combustion or explosion of the cargo, especially when stored in a place with limited ventilation as the Vessel’s holds.
Conclusion
In 2019, Brazil was ranked as the largest soybean exporter, trading 47.6% of the total value of soybeans in the world. In 2020, Brazil is projected to be the largest soybean producer, surpassing the United States of America that previously held this position. When it comes to corn, Brazil was ranked as the third largest exporter in 2019 and is projected to be the third largest producer in 2020.
Between the main destinies for the referred commodities, China, Spain and Netherlands hold the first positions as main soybean buyers. Regarding to corn, Japan, Iran and Vietnam figure as the top buyers.
In view of the above, we consider this to be a fundamental issue for the interested parties. If the aforementioned tendencies are confirmed, the ‘crop dispute’ for storage and transport logistics will continue happening at even higher frequencies, increasing the possibility of shipping damaged cargo.
João Eduardo Kuhlmann
Kuhlmann Surveyors & Consultants
July 16th, 2020.
[1] Ministry of Agriculture - Retrospective 2019: https://www.gov.br/agricultura/pt-br/retrospectiva2019/imagens/retrospectiva.2019.pdf [2] Agribusiness Projections, Brazil 2018/2019 to 2028/2029: https://www.gov.br/agricultura/pt-br/assuntos/politica-agricola/todas-publicacoes-de-politica-agricola/projecoes-do-agronegocio/projecoes-do-agronegocio-2018-2019-2028-2029/view [3] Mato Grosso leads as the major grain producer in Brazil: http://www.mt.gov.br/-/12387007-mato-grosso-segue-como-maior-produtor-de-graos-do-pais [4] Economy bulletin, CNT: https://cdn.cnt.org.br/diretorioVirtualPrd/27a8aaa2-f440-4656-be30-e7eecb8b55e3.pdf [5] The incorporation of Matopiba (Maranhão, Tocantins, Piauí and Bahia) in grain production is threatening Cerrado: http://repositorio.ipea.gov.br/bitstream/11058/9239/1/A%20Fronteira%20agropecuária.pdf [6] On-Farm soybean drying and storage: https://www.uaex.edu/farm-ranch/crops-commercial-horticulture/Grain_drying_and_storage/soybean_drying_and_storage.as [7] On-Farm corn drying and storage: https://www.uaex.edu/farm-ranch/crops-commercial-horticulture/Grain_drying_and_storage/corn_drying_and_storage.aspx
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