Chinese demand pushes Arlon’s Brazil freight unit grain shipments 18%

SAO PAULO – Freight company Sotran SA Logistica e Transporte, a unit of U.S.-based Arlon Group in Brazil, expects its grain shipments to rise 18 percent this year due to Chinese demand for Brazilian soybeans and a strong dollar, an executive said.

A trade spat between the United States and China supported demand for grain transportation contracts through September, with Chinese buyers paying a premium for Brazilian soy, helping Sotran stay on target despite disruption from a truckers’ strike, Director of New Business Rosler Dallamaria said.

Sotran’s outlook has also not been impacted by new minimum freight prices the government put in place as one of the measures to end the 11-day truckers’ strike in May that disrupted deliveries to supermarkets and ports, he said in an interview.

The measure was opposed by farm and industrial lobbies that said it would raise costs and political and legal battles in connection with it has made it difficult to settle shipping contracts.

But Sotran, Brazil’s largest specialist shipper of agricultural commodities, has avoided the policy hurting its business in the country, the world’s largest exporter of soybeans.

“The contracts that existed before the government set minimum freight prices were adapted,” Dallamaria said, alluding to the new price terms introduced by the government for truck freight.

Sotran expects to ship 13 million tonnes of grain this year, up from 11 million tonnes last year, he said.

Business in the second quarter was “hot,” Dallamaria said, adding that Sotran has projected revenue of 1.2 billion reais ($307 million) for 2018.

Brazil’s powerful farm lobby has denounced the new freight prices measure as a threat to free markets and vowed to fight it in the courts.

Oilseeds crushers association Abiove, whose members include big grain handlers like Cargill Inc and Archer Daniels Midland , called the new law “backward” for reinstating policies that Brazil had relinquished in the 1990s.

New transportation contracts also hinge on forward grains sales, which have lagged due to uncertainty related to freight prices and whether the courts will uphold the validity of the new law.

Sotran loads 2,000 trucks per day, Dallamaria said.

Arlon Group, a food and agriculture investment firm, acquired control of Sotran in November of 2016 for an undisclosed sum.

($1 = 3.9122 reais)

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