Soy and Grain exports from Nueva Palmira Port are experiencing 30 day delays

Map showing Nueva Palmira, Uruguay’s principal port for soy exports. Nueva Palmira is now experiencing delays of up to 30 days to load soy exports

Soy and grain cargo going through Nueva Palmira is experiencing significant delays in loading. In some cases cargo has been delayed 30 days.

The president of Uruguay’s National Port Administration (ANP), Alberto Díaz, told the Uruguayan newspaper El País that theses delays are caused by the timing of ships arriving into Nueva Palimra port to load merchandise. “The sale of grain for export has unique characteristics”, said Díaz.

He explained that producers sell their grains in July, for example, but the boats charged with transporting them don’t arrive until the end of the month. “The seller sells their produce but the boat arrives in the last few days of the month. The seller is inside the deadline to comply with the request, but it generates a delay in the cargo for several weeks.” Díaz said. Regionally these delays are being seen mainly in Brazilian ports but also in Argentina.

“What we should do is try to improve access and cut down the time frames and find some benefits for the export sector” Díaz added. The ANP, which he heads, is in charge of coordinating all aspects of the supply chain passing through the port.

ANP is studying the possibility of loading merchandise at the floating station Punta del Arenal, located in the River Uruguay north of Nueva Palmira, to bypass the delays. ANP would only permit this option in the case of significant delays. If there weren’t delays at Nueva Palimra and exporters still wanted to use the floating station, they would face additional charges.

The majority of the grain being exported through Nueva Palmira is soy. All these exports are connected which is an important aspect of the harvest said Díaz. “Everyone wants to be the first to ship because that is when it [soy] has the highest value, later on the market begins to change and it trades at a lower price” Díaz explained.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguayan agricultural products hurt by increasing transport costs

The Rural Association of Uruguay presented the government with a concerning report contrasting the high cost of agriculture transportation in Uruguay with the rest of the region 

Increases in agricultural production reveal Uruguay’s lack of infrastructure.

The burden of hiring transportation has increased costs for producers in the agricultural sector and contributed to a deterioration in profits and competitiveness compared to the rest of the region.

According to a study conducted by the Rural Association of Uruguay (ARU), there is a widening gap in agricultural transportation costs between Uruguay, and Argentina and Brazil. In 2011, the cost of hiring a truck to transport 28 metric tons of grain 200 kilometers was $746 USD  in Uruguay while it cost $672 USD in Argentina and $293 USD in Brazil.

In Uruguay’s case, the cost of transportation in dollars increased 27% between 2009 and 2011, going from $600 USD to $764 USD this past year. Meanwhile, in Brazil this cost has practically not changed in the last two years (going from $279 USD to $293 USD), in Argentina the change was greater jumping from $447 USD to $672 USD.

“There are various factors that are acting on this: on one side it could be country costs, cargo taxes, salaries, exchange rate fluctuations, but it is also possible, and we aren’t sure, that those hiring transportation are negotiating poorly” the president of the ARU, José Bonica, told El Observador.

According to the organization’s report presented this week to the Committee on the Cargo Transportation Sector, “the costs of the production has been undergoing a constant increase measured in current dollars and in the basket [of agricultural costs], the weight of freight transport is more every time”.

The commission was created at the request of Transportation, Economy, Industry and Livestock ministries, with the objective of identifying problems and generating solutions to the rising costs.

“At a political level as well as at the societal level, there exists a dangerous excessive desire for success on the subject of agricultural production. The increased prices of our products in international markets serve as an insufficient argument which forgets a substantive concept, the competitiveness of our sectors”, added the document.

The completion of the study corresponds with the request by transporters to suspend grants of new cargo truck licences for 60 days which was accepted by the Transportation Ministry and has been applied since April 13th.

Truck owners justified the request by alluding to problems within the sector caused by new Argentinean trade barriers which have decreased shipments to Argentina. According to a study published in October of 2011 by the business El Tejar, the number of trucks grew by 85% from 2002 up to the 5,500 currently registered  by the Transportation Ministry. The ARU maintains that “[producers] are conditioned to assuming high domestic transportation costs, and these are aggravated by an inefficient use of resources, also because of the high amount of production [producers] will have to take on elevated production costs, of which freight has become a disproportionate amount”.

The report establishes that in soy production the freight costs (of the ingredients and the grain produced) increased to 18% of the total costs, that includes the preparation at farms, as well as sowing, and harvest. In the case of wheat the problem is greater, now freight has increased to 20% of total cost.

An even more alarming equation is the one used by the ARU to compare the cost of freight with respect to the value of the cargo transported. “Considering only the transportation from farm to plant, the costs takes approximately 10% of the gross revenue of soy producers and 23% for wheat producers”, reported the study.

Using the international oilseed prices in May of this year (around $530 USD per metric ton), transportation to a port will consume 7.4% of the shipment’s value for a 200km trip and 11.5% for 400km. Wheat, which pays close $225 USD per ton, this cost component is between 17.4% and 27% of the value at the same distances.

In the case of rice production, the analysis was different depending on its variant. But assuming  a 70km trip from farm to industrial plant (with 30% by dirt road and 70% over asphalt) in the central region of the country, the freight cost is 8% of the revenue generated.

The ARU report does not claim to represent the interests of producers or transporters, and treats the two sectors as “dependant” on one another. Nevertheless, they are seeking a formula for a mutually profitable relationship between the two.

This Uruguay Business Reports article is a translation of one which appeared in the Uruguayan newspaper El Observador. The original spanish language news article is available here. Uruguay Business Reports translation by Donovan Carberry.

This year’s soybean harvest will require Uruguay’s full logistic capacity; Port terminals must move a historic harvest of two million metric tons of Soybeans

The record soybean harvest that begins this month will require the full logistic capacity of the Uruguayan economy. Port operators and transporters assured El Observador that the advances in infrastructure still are not expected to be complete but that with more organization and coordination in the supply chain the challenge coming in the following months can be successfully met

The port of Nueva Palmira is the principal point of exit for Uruguayan soybeans and both the capacity and time it takes to load the vessels, as well as truck access to the port area, have been important obstacles to improving operation during previous seasons.

This year the country’s exits points will have to move close to two million metric tones of soybeans that will bring in close to $1,100 million USD, with this harvest soybeans will displace beef as Uruguay’s principal export.

During the 2011 harvest, the principal complaint of the sector was the need to improve truck access to ports, including the means of arrival at Nueva Palmira.

This weakness in infrastructure lead the government to make routes 21 and 24, which connect the port terminal with the region’s agricultural zone, priorities in the work plan and Public Private Participation (PPP) framework .  However, these advances await the practical implementation of the scheme.

The Captian of the port of Nueva Palmira, Flavio Castro, and the director of the Guild of Professional Cargo Transporters, Humberto Perrone, assured El Observador that many of the problems have been solved. Some improvements have been made to the routes connecting the agricultural zone of the country with the port terminals and  a truck ramp has been constructed that accommodate 100 vehicles and allows direct entry to the center of the port, composed of the Navíos terminal, Uruguayan Grain Terminals terminal (which operates as public terminal) and Ontur.

“this ramp has organized truck arrivals and avoided the bottleneck that had been forming at the entrance of the port. What is more, it was a solution for the truckers because they have access to services that they didn’t have when they were waiting in the street to enter the port”, said Flavio Castro.

For his part, Humberto Perrone insisted that “more than the physical space, the fundamental thing has been the coordination”.

Perrone believes it is the only way to organize the transit of vehicles in the area and that “was already demonstrated during the recent wheat harvest”, which was much more organized than in past years.

Another important factor for the logistical success of this harvest is the increase in the storage capacity and changes in procedure at many of the businesses in the field. A trip through the outskirts of Nueva Palmira is enough to realize the importance and growth of silos. Further, procedures have changed making the process more efficient.

In this vein Humberto Perrone indicated that “last year they would only load until 6pm and since then many business have opted to work 24 hours, knowing there is demand for this service.”

Flavio Castro pointed out that in Nueva Palmira many businesses have invested very heavily and that within a radius of 15 kilometers a lot has been invested in the construction of silos. Further, “there are plants that have their own parking lots which has done a lot to reduce congestion in the area”.

In regards to the storage capacity of the port, he emphasized the expansion of the Navíos terminal where they added a silo with capacity for 50,000 metric tons and pointed out that the Uruguayan Grain Terminals terminal stores 72,000 metric tons.

Put the problem is at the end fo the supply chain, the transport belts which are used to load the boats still have not reached the desired productivity. The three operators have tried to improve conditions, but are still far from the optimal level.

The head of the port, Flavio Castro, said that for the 2012 harvest, Navíos will have capacity to load 2,000 metric tons per hour, Uruguayan Grain Terminals 700 and Ontur 450. In the first case, an improvement in one stretch of the belt allowed for 300 more metric tons per hour, while on the other side Ontur added a belt that can work with two trucks simultaneously and it will increase capacity by 150 metric tons per hour.

Nevertheless, Castro maintains that he is not worried about the huge volume of cargo that will pass through the port because knows that a good performance, like the one exhibited by all the operators during the wheat harvest, will overcome any obstacle.

Humberto Perrone said that the demand for trucks is covered, but emphasized that the fundamental thing is not losing logistic organization. With regards to prices he said that an increase was already made in February to cover the wheat harvest and that, “if nothing strange happens, it will remain the same”.

This article is a translation of the orignal article by Diego Molinelli which appear in El Observador on May 7th, 2012. That article can be seen (in Spanish) here.