Kepler Weber S A : interest in grain storage projects increases ...

Kepler Weber's interest in grain storage projects increases in the first quarter

19/05/2023

Storage deficit puts pressure on logistics and generates a negative premium on soybean and corn, resulting in an estimated loss of R$30.5 billion for Brazil this year.

May 2023 - Kepler Weber's interest in grain processing and storage projects increased by 10% in the first quarter of 2023 compared to the first quarter of 2022, a record-breaking year for the company.

"We spent the week at Agrishow and realized that it is clear for farmers that the more expensive silo is the one they do not have because they know how much it compromises efficiency and prevents them from making more profit", says Bernardo Nogueira, CCO of Kepler Weber.

An exclusive survey conducted by Cogo Inteligência em Agronegócio for Kepler Weber showed that Brazil is expected to lose R$30.5 billion this year, due to negative premiums on soybean and corn. Premiums are defined by supply and demand and can be positive or negative, higher or lower than the Chicago (USA) price.

"Brazil has been showing a historical trend of positive premiums in every month of the year, although it is seasonal, getting lower during harvest and higher during the off-season. In April, Brazil reported the worst negative premium since 2004, and that discount is expected to remain at least until August", explains Carlos Cogo, from the consulting firm responsible for the survey.

According to Cogo, logistics factors are at the core of these billionaire losses for the country.

"Ports with cargo problems, payment of shipment fees, excessive loading time, high freight cost from interior regions to the port, and delays in delivery contribute to negative premiums", he says.

Considering the estimated harvest of 313 million tons, Brazil has a deficit of 124 million tons of grains. According to Nogueira, this excess needs to be taken from farms right after harvest, putting downward pressure on prices paid to producers and generating losses for the country.

"Production growth increasingly putting pressure on the country's static capacity year after year, and that represents a loss of efficiency in agribusiness and poses a threat to food security because, without storage, farmers are exposed to weather conditions and negative premiums", he says.

According to the figures reported by CONAB (National Supply Company), Brazil accounts for only 15% of on-farm static capacity, while the United States accounts for 65%. Over the last ten years, storage has grown approximately 2.8% on average per year, while harvests have increased by 5.5% per year.

"Storage is at the core of negative premiums. We are currently in a global corn off-season, with Ukraine exporting very little, the United States out of the market, Argentina experiencing crop failures, so this loss is due to a Brazilian problem", argues Cogo.

According to the consultant's calculation, the estimated losses due to the lack of storage in Brazil are equivalent to six years of Plano Safras' Program for Construction and Expansion of Warehouses (PCA), and it would be sufficient to pay two months of the Bolsa Família Program. According to Abimaq (Brazilian Machinery and Equipment Industry Association), the industry has been producing equipment to store 5.2 million tons of grains per year.

"The sector is prepared to grow and we are ready to double storage production capacity", Nogueira concludes.

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