Brazil summer grain crop to outgrow storage capacity for first time in 20 years

SAO PAULO (Reuters) - Brazil’s 2022/2023 summer grain production will outgrow total storage capacity for the first time in 20 years amid expectations of a record soybean harvest, according to government data obtained by Reuters from Conab, the food supply and statistics agency.

FILE PHOTO: A corn crop is seen at Cercado Grande farm, where expansion of grains cultivation led the farm to scrap a contract with a sugar mill for cane planting in Itajai, Sao Paulo state, Brazil April 1, 2018. Picture taken April 1, 2018. REUTERS/Marcelo Rodrigues Teixeira

Brazil will harvest a combined 189.5 million tonnes of soybeans, corn and rice in the summer, while it has total storage capacity for 187.9 million tonnes, the data shows.

The situation highlights Brazil’s historical logistical bottlenecks which this year may be exacerbated by a large winter corn harvest.

It also challenges the new administration’s plan to revive government rice, beans and corn inventories to guarantee food security and a local livestock feed supply.

“It is possible that at the peak of the soybean harvest, in the second half of February, March, we will have the old problem of not finding warehouses,” Stelito dos Reis Neto, Conab’s storage chief, said in an interview. “Maybe it will be a little worse this year.”

Paulo Polezi, CFO of silo maker Kepler Weber, told Reuters the storage deficit only reinforced the need to invest in such structures in Brazil. He cited a study saying a 10 billion real ($1.96 billion) investment was needed to close the storage gap.

Polezi also noted a lack of buffer stocks meant large volumes of grain have to move at the same time, boosting freight costs at season peak times.

Conab’s share of Brazil’s overall storage capacity is 1%.

Neto Reis said Brazil had practically no competition in the first half, when it exports most of its soybean crop, which eases storage pressure.

But in the second half Brazil’s logistical woes worsen amid greater competition in export markets, especially with the arrival of the U.S. soybean harvest.

After Brazil’s soy is harvested, the country sows its second corn crop. This winter, it will raise production by 12% to an estimated 96 million tonnes of corn.

($1 = 5.1069 reais)

Reporting by Roberto Samora; Writing by Ana Mano; Editing by Steven Grattan and Bernadette Baum