SAO PAULO, June 22 (Reuters) - Grain handlers have stopped buying Brazilian corn and soy from local farmers for more than three weeks as concerns over rising freight costs have frozen the market for two of the country’s main commodities, traders told Reuters on Friday.
Brazil has recently finished harvesting its 2018 soybeans and is now collecting its second corn crop in earnest.
The rise of freight prices is also disrupting pickup of soybeans bought during April and May, when port premiums spiked at the onset of a trade fight pitting the United States against China, accelerating sales of Brazilian beans.
Concerns over transportation costs have led handlers in Brazil to delay removal of products from farmers’ warehouses to avoid doing so at a loss, the traders said.
“The order is not to buy,” a Mato Grosso-based trader told Reuters.
“There have been no bids for corn or future soy for about 25 days,” said a Paraná-based trader who also is not authorized to speak to the media.
The problem is likely to persist until rules to set truck freight prices are more clearly defined by the government, the traders said.
The situation increases operational risks to grain handlers in Brazil, the world’s largest soybean exporter and second-largest corn exporter.
“At some point they will need to return to the market to fulfill orders and honor take or pay contracts,” one of the traders said.
According to farmer-backed Mato Grosso research institute IMEA, through last week Brazil’s largest grain state had yet to sell about 32 percent of this year’s second corn.
Brazilian grain shipping costs rose sharply in the past few weeks after the government imposed minimum prices for truck freight. Such a measure followed a nationwide trucker protest which virtually paralyzed the country’s economy for 11 days last month. The movement forced government to subsidize fuel and impose minimum freight prices as part of the solution to lift the stoppage.
Chaos in Brazil’s transportation sector and lower Chicago grain prices due to the escalation of the global trade war also caused Brazilian farmers to lose the opportunity to sell future soy when the beans were quoted above $10 per bushel, the traders said.
“There is strong demand for Brazilian soy but our logistical bottlenecks means farmers cannot take advantage,” one of the traders said. (Reporting by Ana Mano Editing by Marguerita Choy)