Grain Storage: A Major Opportunity for Private Credit

Deficiencies in logistics and storage remain significant obstacles to the development of Brazilian agribusiness. This issue becomes evident when comparing the growth in grain storage capacity with the increase in production from 2010 to 2023. Storage capacity has dropped by one-third since it reached 91% in 2010, ending 2023 with around 60%. This figure is far below the recommendation of the Food and Agriculture Organization (FAO), which suggests that a country’s storage capacity should be 1.2 times its annual agricultural production.

Unlike the United States, where storage units are located near or integrated into farm complexes, in Brazil, only 15% of farms have warehouses or silos, according to data from CONAB (National Supply Company). By comparison, this percentage is approximately 54% in the United States and around 80% in Canada. Additionally, in Brazil, grain storage infrastructure is primarily composed of bulk storage units (silos), which account for 78% of total capacity. The remaining 22% consists of conventional warehouses that use bags and bales for storage, presenting disadvantages in terms of conservation and loading/unloading efficiency compared to silo systems.

This situation is particularly evident in the Midwest region, the country’s largest grain-producing area, where the most severe storage deficits are concentrated. In Mato Grosso, for example, despite having the largest grain storage capacity among Brazilian states—around 38 million tons—its facilities can only store half of its production. This storage deficit exposes grain producers in the Midwest and across Brazil to significant economic losses. Producers are forced to sell much of their harvest during the peak season, leading to higher freight costs (which rise significantly during harvest) and lower prices compared to international markets, as prices are often benchmarked against the Chicago Board of Trade.

With record harvests expected in 2024 and the severe grain storage deficit, export prices for soybeans and corn are currently below international market levels. The first forecast for the 2024/2025 grain harvest, conducted by CONAB, points to production of 322.47 million tons. This represents an 8.3% increase over the 2023/2024 cycle—an additional 24.62 million tons. Given the anticipated rise in production, the price decline will likely persist in the coming years unless new investments in storage infrastructure are made. A study conducted by the Grain Storage Equipment Sector Chamber (CSEAG) of Abimaq indicates that approximately R$ 10 billion per year would be needed over ten years to eliminate the storage deficit by 2030.

However, recent data shows investments are far below the required storage capacity to support production growth. The primary public credit program for this purpose—the Program for Construction and Expansion of Warehouses (PCA) from the National Bank for Economic and Social Development (BNDES)—allocated only R$ 4.12 billion in 2022. The program offers credit of up to R$ 50 million, payable over 12 years, with a grace period of up to two years and interest rates between 7% and 8.5% per year, depending on the size of the storage unit. Recently, Banco do Brasil and the New Development Bank (NDB) announced R$ 1.5 billion in credit for warehouse construction.

Still, historical data indicates that about 70% of the public credit volume offered is used. The reduced demand mainly includes excessive collateral requirements, high bureaucracy, low market interest in such projects, and a lack of awareness about the storage “deficit” and its associated costs.

According to Tadeu Vino, Commercial and Marketing Superintendent at Kepler Weber, a Brazilian company specializing in post-harvest services, producers’ profits could increase by approximately 15% with new storage facilities, allowing the investment to be recovered within five to six years. A storage unit can last more than 30 years when properly maintained with preventive care. A study by the Thematic Chamber of Infrastructure and Logistics (CTLOG) indicates that the Internal Rate of Return (IRR) for this type of investment would be 6% per year, with an average occupancy rate of 62% required to make the project economically viable.

Therefore, there is an annual investment deficit of at least R$ 5 billion in storage infrastructure, while the sector suffers losses of R$ 20 billion. There is significant return potential for producers and entrepreneurs who invest in this sector—particularly in bulk storage (silos)—as well as great opportunities for expanding private credit to address this gap. With less bureaucratic credit sources tied to project performance, all stakeholders stand to benefit from the gains that Brazil’s export-driven commodity sector is expected to generate in the coming decades.