The Brazilian logistics industry is still waiting for the real impacts of a planting delay and other issues with the 2020-21 soybean harvest resulting from a lack of rainfall, especially in the center-west region.
Typically the first volumes of soybeans reach the market in mid-January, but many market participants believe that this will occur in February this season, causing a later-than-usual rise in demand for grain transport services. The unfavorable weather has resulted in soybean producers having to reseed some of their crops, which will push harvest times back. Reseeding in Mato Grosso, Brazil's largest producing state, reached 2.5pc, according to the Mato Grosso Institute of Agricultural Economics (Imea). Some regions of the state had to replant up to 5.7pc of soybeans.
Another point of concern is that with the delay in harvesting in Mato Grosso, harvesting in several states may happen at the same time. This would lead to higher than expected competition for available trucks and contribute to higher grain freight rates.
Some carriers have only renewed their existing fleets, without increasing the number of trucks, which also may increase competition for vehicles. This is a result of the Covid-19 pandemic, which affected production at Brazilian factories throughout 2020, mainly causing difficulties with inputs.
In fertilizer freight, with delays in harvests and possible changes to other crops throughout the year, the demand outlook for nutrients is steady throughout 2021, instead of being concentrated in certain periods, impacting the flow of fertilizer.
There are also concerns about how the delay in the soybean crop may impact the planting of corn in 2021. In addition to a smaller window for planting, weather conditions can be an obstacle. The La Niña weather pattern that is expected to be strong this season can reduce rainfall in the center-south region of Brazil, where large producing states such as Mato Grosso do Sul, Mato Grosso, Goias, Parana, Sao Paulo and Rio Grande do Sul are located.
Market participants also point out that some inputs may make freight more expensive in 2021. With the expectation of the recovery of the Brazilian economy, there is also an expectation for greater demand for fuel, which may raise prices at refineries. This would contribute to higher grain and fertilizer freight rates.
Infrastructure projects are also expected to develop throughout the year. One highlight is work for the implementation of the Multimodal Platform of the North-South Railway in the municipality of Rio Verde, located in Goias state. The project is the responsibility of Brazilian rail operator Rumo, controlled by the Cosan group. The platform should connect Porto Nacional, in Tocantins state, and Estrela D'Oeste, in Sao Paulo state. It is expected to be fully operational in May 2021.
The approval of vaccines for Covid-19 is also on the radar. Although the logistics sector has not been so affected by the pandemic, there will be no Carnival celebrations in February, a traditional break for many workers. This can also affect the return of drivers to the roads, and a possible vaccine could boost this movement.
Overall 2020 was a favorable year for logistics, as it was for agriculture in Brazil. The sector was not strongly affected by the pandemic, costs for carriers were under control with low demand for fuel and Brazil had record exports of soybeans, corn and sugar amid favorable exchange rates.
