The strike, which was spurred by rapidly rising fuel prices combined with the effects of the Brazilian real weakening against the U.S. dollar, caused estimated losses of $1.75 billion to Brazil’s agriculture sector, the USDA said.
The USDA said one of the Brazilian government’s concessions to end the strike, a minimum freight rate guaranteed to truckers, is continuing to wreak havoc on grain and oilseed trade.
“The policy, which was implemented by presidential decree on May 30, was immediately criticized by a number of transportation-dependent industries, chief among them agriculture,” the USDA said.
Brazil’s lack of substantial rail or inland waterway infrastructure means that producers in the CenterWest region must rely on trucks to transport their commodities to ports for export or to domestic consumers in other parts of the country. The minimum freight rate policy has caused the transport of crops to become substantially more expensive, and Brazil’s National Confederation of Agriculture and Livestock (CNA) has estimated that the policy is increasing freight rates by 50% to 150% throughout the country, with Brazil’s powerhouse agricultural regions being hit the hardest.
The USDA noted that the CNA and other players in the agricultural sector have challenged the minimum price measure in court through more than 50 lawsuits, and Brazil’s Supreme Court is trying to mediate a resolution, but several rounds of meetings with truck drivers have not yet yielded a solution. The court is scheduled to take up the measure again in late August.
In a parallel process, the Brazilian congress also has taken up the measure in an effort to make it permanent. The provision was approved by the lower house and will be considered by the senate when they return from recess in August.
The USDA said the policy has caused the transportation of agricultural commodities to slow substantially, with large grain and oilseed traders reporting they have largely stopped participating in the market because freight rates are too high and the future of the policy is too uncertain to make forward purchases.
“Since soybeans are harvested first, this has largely affected those exports so far,” the USDA said. “However, the safrinha corn harvest is ramping up across Brazil and limited storage space (already filled with soybeans waiting for export) and expensive freight rates will affect the rate of Brazil’s safrinha corn exports.”