Logistics chaos of Brazil is profitable to the USA

The chairman (CEO) of SLC Agrícola, Aurélio Pavinato, said yesterday that the logistics chaos is increasing the profits of the grain producing countries which compete with Brazil. The price is higher to pay the Brazilian logistics account, and the American producer is profiting more out of this, he exemplified.

The profitability of the Brazilian production, in return, is falling. Currently, it (the logistics) is generating losses for the whole chain. The producer is profiting less, the trading, which was already acquired, is losing, and the consumer will pay more for the product, he concluded.

SLC Agrícola is one of the biggest landowners and one of the largest agricultural producers of the Country in regards to cultivated area of cotton, soy and corn. According to Pavinato, with the present logistics costs, Brazil has no condition to compete in the corn market with the United States, Argentina and Europe.

He highlighted that nowadays the transportation cost to carry the corn from the state of Mato Grosso to ports costs between 50% and 60% of the product price. For soy, this percentage is, at most, 30%.

The executive also estimated that the greater volatility of the quotations of agricultural commodities, with the increased cultivation in marginal areas, offers greater climate risk, and the larger grain trade volume in the financial market demands strict control of the expenses. The cost of fertilizers has a very large fluctuation throughout the year. If you purchase in the wrong period, you fix a high cost, he explained.

The executive of SLC Agrícola asserted that the company is reducing the pace of the future trading of the 2013/14 harvest as a result of the high freight prices. It is more difficult to sell because of the overrating of freights.  However, according to him, there is a rebalancing trend in the prices to transport grains, with the need to adapt to the Truck Drivers Law and investments from the transportation companies. The company sells the whole corn and soy production in the farm, according to Pavinato.

The executive stated that current prices of corn and soy, falling in comparison to last year’s, correspond to the full harvest pricing in the United States and in Brazil, with the same trend observed in the previous period, before the drought reduced the American production.

In the assessment of Pavinato, there is space for a good compensation of the corn production in Paraná, even with the full harvest, because of the existing demand of the agricultural industries, especially in the state of Santa Catarina.

The company projects to cultivate 310 thousand hectares in the 2013/14 harvest, in comparison to 280 thousand hectares in the 2012/13 cycle. The three crops (corn, soy and cotton) should grow in a planted area, but the crop distribution has not been defined yet. The growth of the cultivated area happens on areas already acquired and which will be opened by SLC during this cycle, with partnerships with producers and leases.

Pavinato said the company continues to purchase lands, but he expects the accommodation of prices to make new deals. The long-term trend is that land prices keep on the rise.