Truck Shortage in Brazil Squeezes Fertilizer Companies on Costs

  • Freight rates increased as much as 35% in past three months
  • Mosaic says producers will try passing on increase to farmers

Fertilizer companies are facing a new challenge in Brazil, where a shortage of road transport is forcing up the cost of moving their production into the nation’s interior.

Transport expenses rose as much as 35 percent in the past three months amid a lack of trucks at ports, said Eduardo Monteiro, a supply-chain director at Mosaic Co., a U.S. producer of potash and phosphate crop nutrients. The cost of some individual routes has doubled from a year ago, according to an industry group representing companies that blend fertilizers.

"All the fertilizer companies will be affected by higher freight costs," Monteiro said in a telephone interview Friday. "We’re trying to manage it at the best possible way."

The problem stems from Brazil’s disappointing corn crop. Most of the nation’s grain exports are carried to port by truck. The same vehicles often haul fertilizer on their return journeys, as Brazil imports about 90 percent of its needs. The decline this year in corn export volumes, and a corresponding jump in imports to make up for a shortfall of animal feed, has left the fertilizer industry scrambling to find sufficient transport. The country’s main planting season starts in September.

While freight rates for transporting fertilizer from the port of Paranagua in Parana state to Rondonopolis in Mato Grosso increased 28 percent since June, the cost of taking soybeans on the opposite journey dropped 5 percent, according to Esalq-Log, a logistics research arm of the University of Sao Paulo.

Adding to the pressure is rising fertilizer demand. Sales in Brazil are heading for a record, according to data from industry group Anda.

Almost all fertilizer sales in Brazil are made inclusive of freight and most producers don’t usually hedge those costs, according to Carlos Florence, president of Associação dos Misturadores de Adubos do Brasil, the group representing blenders.

Fertilizer producers are trying to pass on the extra expense to customers, though Brazilian farmers, struggling with a shortage of credit, are resisting higher prices, Monteiro said. Florence said it’s likely the companies will end up absorbing the higher freight costs.

Other major producers selling fertilizer in Brazil, the world’s biggest exporter of soybeans and the second-largest shipper of corn, include Yara International ASA and Fertilizantes Heringer SA. Spokesmen for both companies declined to comment on freight costs.

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