In an unexpected turn of events, the price of road freight in Brazil saw a decline in the first quarter, attributed to stagnant sales in the grain market, particularly soybeans, and relatively stable diesel prices in recent months, according to organizations conducting surveys.
This decline in freight rates in the first quarter is unusual, given that demand to transport grains in Brazil typically peaks during this period, often driving up transportation costs due to soybean harvesting and trading.
However, this year witnessed a setback in the Brazilian soybean crop, resulting in lower demand for fertilizer transportation, while diesel prices— a significant cost factor for transporters— remained largely unchanged.
Sales of the crop were sluggish, with lower international soybean prices prompting producers to slow down sales, noted Argus, a company specializing in pricing and consulting services.
"As a result, grain freight rates during the harvest season decreased— an unusual trend for this time of year— due to lower demand for transportation services," highlighted Argus in a report sent to Reuters.
Freight rates from Sorriso to Rondonópolis (MT), bound for the Rondonópolis rail terminal, dropped to 150 reais/ton at the end of March, compared to 165 reais/ton during the same period in 2023.
Meanwhile, the Sorriso-Miritituba route, which traverses BR-163 highway to the hydrovia transshipment point in Pará, stood at 250 reais/ton at the end of March, down from 285 reais/ton the previous year.
A report on the Edenred Repom Freight Index (IFR), from another market monitoring organization, also showed that the delay in grain sales and the downward trend in diesel prices were the main factors contributing to the drop in the average freight price per kilometer traveled in March. The national average freight was 6.20 reais per km traveled in March, down 1.4% from February.
"We closed the first quarter of 2024 with a cumulative 2.5% decrease in the average freight price per kilometer traveled. Compared to March 2023, when the price was at 7.97 reais, the price reduction reaches 22%," said Vinicios Fernandes, director of Edenred Repom, in a statement.
According to analysis from the Edenred Ticket Log Diesel Price Index (IPTL), the price of common diesel fuel closed March at 5.96 reais/liter and S-10 at 6.07 reais, both with a 1% decrease compared to February. However, the price behavior of the fuel saw slight percentage fluctuations, between declines and increases, over the quarter.
In the first half of April, the IPTL showed a slight increase from the end of March.
Fertilizers and Bottlenecks
According to Argus, demand for fertilizer freight was also "exceptionally lower" in the first quarter, further pressing down transportation costs.
"At this time of year, farmers typically receive large volumes of fertilizers to support soybean harvesting and corn planting activities. But purchasing inputs was also postponed as producers delayed crop sales," added Argus.
In Paranaguá, freight rates to Rondonópolis reached 213 reais/ton at the end of March, compared to 250 reais/ton in 2023. Freight rates to Sorriso were at 305 reais/ton, down from 330 reais/ton in 2023.
"This scenario concerns market participants as it may cause a logistical bottleneck," stated Argus, citing potential demand concentration later on.
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