Transport strike causes $1.75bn in damage to Brazil’s agricultural sector: USDA

By Aerin Einstein-Curtis contact

- Last updated on GMT

©GettyImages/ 12963734
©GettyImages/ 12963734
The transport strike in Brazil caused challenges for animal producers in terms of feed deliveries and the action still has ramifications for exports of feed grains, says the USDA.

The 11-day strike by truck drivers in Brazil in protest at high diesel prices caused an estimated $1.75bn in damage to Brazil’s agricultural sector, according to a US Department of Agriculture (USDA) report​. During the strike, drivers parked rigs along roads, refused to make deliveries and established roadblocks on portions of some of the 500 busiest highways in the country.

Prior to the strike, high prices had already started to negatively affect agricultural exports.

“A study by the College of Agriculture at the University of Sao Paulo (ESALQ) found that farmers were paying an average of 9.05 reals (US$ 2.42) more per ton than early 2017 to transport oilseeds and grains from Mato Grosso to the Port of Santos in Sao Paulo​,” she said. “ESALQ estimated that in 2017, the cost to move Brazilian agricultural goods around the country reached 120 billion reals, with 87.5% going to transportation costs.”

The strike led to gas stations running out fuel, flights being canceled and supermarket shelves running low, she said.

“Virtually all segments of Brazil’s agricultural sector were affected in some way, but livestock and poultry operations were particularly hard hit by feed delivery disruptions, idled slaughterhouses, export stoppages, and ultimately the culling of tens of millions of animals.”

“A month after Brazil’s longest trucker strike, transportation and logistics challenges still persist for Brazil’s exporters, as shipments of Brazilian commodities are still delayed, supply chains are still experiencing bottlenecks, and debate and uncertainty about Brazil’s transportation policies and prices continue to plague the agricultural sector,”​ said the attaché.

Feed transport challenges

One aspect highlighted by the stirke is the fact that Brazil has little rail and waterway infrastructure able to transport goods, the attaché said.

“Brazil’s farmers are dependent on trucks to move their goods within the domestic market and to ports for sale to the international market,” ​she said.

When the strike started, the soybean harvest had almost finished and the second-crop corn harvest was starting, she said. However, the corn harvest stalled as producers ran out of fuel.

“Loading at some of Brazil’s largest soybean-exporting ports, including Santos, Paranagua, Rio Grande, and Santarem, ground to a halt during the strike, as on-port stocks emptied and roadblocks kept trucks from delivering commodities for export,” ​she said. All 63 of the soy-crushing facilities in the country stopped work during the strike as they ran out of inventory, she added.

Goods, feed and feed ingredients like corn and soybeans have started to move again, but it is expected that producers may need six months to a year to recover from the temporary slowdown, said the attaché. There also are questions about some of the provisions made to end the strike, including the start of a minimum freight rate guaranteed for truckers.

“CNA [Brail’s National Confederation of Agriculture and Livestock] reports that soy and corn producers and traders are already paying an additional R$ 500m (US$ 132m) for transportation every day, for a total of more than R$ 10bn (US$ 2.65bn) so far,” ​she said. “Analysis by CNA forecasts that the policy is increasing freight rates by approximately 50-150% throughout the country, with Brazil’s powerhouse agricultural region in the interior of the country being hit the hardest.”

Continued uncertainty about that policy is anticipated to increase challenges during the ongoing harvest of the second-crop corn, she said. Limited storage capacity and the slow movement of soybeans in June mean that corn has to compete with the feed crop for transportation and storage.

Grain traders also have stopped making new purchases of soybeans or corn for export and are reportedly delaying picking up feed grains to avoid the increasing transportation fees, said the attaché. It is estimated that about 10m tons of soybeans were stuck in the middle of the country as vessels wait to be loaded and exports of at least 6.8m tons of soybeans and soybean meal have been delayed.

Feed use and animal production

“The most significant losses from the strike were born by the chicken and pork production sector​,” the attaché said. “Shortages of fuel and animal feed affected farms and feedlots, while slaughterhouses idled their production lines when transportation to the ports was cut off and refrigerated warehouses filled to capacity.”

The sector is through to have lost about $1.05bn in exports, and 137 poultry plants and 30 swine slaughterhouses were closed at the time, she said.

“As feed rations ran low, some poultry operations were only feeding birds once every 48 hours, considered starvation rations, according to MAPA Minister Maggi​,” she said. “Particularly worrisome for the world’s largest exporter of chicken was the fact that poultry operations were forced to cull an estimated 70m birds (about 7% of Brazil’s flock of 1bn birds), bringing the level of chicks on breeder farms down to their lowest levels in a decade.”

There was a call for security forces to escort in shipments of poultry feed during the strike, said the attaché.

Additionally, most beef slaughterhouses closed and loss of export income and in waste product are estimated to be about $2.1bn, she said. Dairy producers also saw challenges from the inability to move their products to market.

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