June 2, 2008

Lack of storage space curbs soy profits for Brazilian soy farmers

Lack of proper storage facilities is seen as a factor limiting profits for Brazilian soy farmers, according to a USDA report posted Friday (May 30, 2008).

Although storage capacity is slowly increasing due to investment by multinationals, much product is still stored in the open on-farm, which leads to unnecessary loss and difficulty in tracking actual stock levels.

In spite of higher soy production in 07/08, strong domestic consumption, accelerated crushing, and strong exports have caused Brazil's stocks to decrease to their lowest levels in 6 years

The Brazilian government does not hold oilseed stocks. Most are held by cooperatives, processors, or at the port.

Domestic processors and cooperatives carry soy as "stocks" until the commodity is priced, the report said.

Brazil's on-farm capacity is extremely small and can currently accommodate only about 5-7 percent of the local crop.

Although storage space is expanding at all levels, it is not keeping up with production growth, the report said.

Over the past several years grain storage capacity has increased only 10 percent that of grain production while the grain storage deficit is about 30 percent.

Although storage is increasing in frontier areas, many farmers have spent their profits buying more farmland instead of building on-farm storage and rely on multinationals for storage. Thus they would be forced to take whatever the price happens to be at harvest.