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Brazil Strike Lights Fire Under Soybean Market

PORTO ALEGRE, Brazil ( biggest soybean truckers strike in 15 years has broken out in Brazil. It’s slowing soybean transportation and rallying the markets.

On Tuesday, the truckers strike fueled the CME Group's May soybean futures up 26 cents to $10.32 per bushel. The Nov. soybean futures pushed up 20 cents to trade as high as $10.02 per bushel.

Early last week, truckers from the Brazilian state of Mato Grosso decided to go on a strike blocking two major federal highways, BR-163 and BR-364, which are the top roads for grain transport. In an unexpected move, truckers from other big producing states such as Rio Grande do Sul and Paraná also started to block major highways and it became so significant that attracted the eyes of the grain markets as Brazil reaches the soybean harvest peak with 21% of progress.

The top issue concerning truckers is a fuel tax hike that generated an average increase of over R$ 0.20 (US$ 0.07) per liter at the pump take into effect since February 1, while freight prices are lower because of a dropping soybean value. But there are other worries such as tolls, road infrastructure, state taxes and so forth.

Some farmers came to support the truckers movement, but others manifested preoccupation as the harvest is already delayed in the center-west compared to previous years. "This protest requires a minimum of order because we are connected at the same productive chain. We, the rural properties, need be able to be supplied with diesel and to guarantee the transport of soybean to the silos and warehouses," defended Ricardo Tomczyk, president of the Association of Soybean Growers of Mato Grosso, in a public statement.

In Mato Grosso, truckers claim for a reduction of the state circulation tax from 17% to 12%, which is being considered by governor Pedro Taques. However, the national government so far has not shown any will of reducing fuel taxes. Brazil's Attorney General just warned the truckers unions could be fined in up R$ 100,000 (US$ 35,248) per day, if the roads are not unblocked through a lawsuit.

The strike may become more problematic, if it lasts for more weeks. In Paraná, some locations already suffer with lack of gas supply and food distribution.

Another problem can be a major delay of the soybean harvest in the center-west of the country. In Goiás, harvest is under 27%, which is a significant delay compared to other years (average of 37% by this week) because of dryness in January, but also Goiás is another state affected by the strike. 

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