April 11, 2012

Railroad Expansion in Brazil Not Keeping Pace with Crop Increases

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Brazil continues to make slow progress in increasing the amount of cargo moved by rail in the country, but it has not been enough to keep pace with the increase in grain production over the last 14 years. According to the National Association of Railroad Transporters (ANTF), between 1997 and 2011 the amount of cargo moved by rail increased from 253 million tons in 1997 to 475 million tons in 2011, or an increase of 87%. As a comparison, soybean production in Brazil during the same period increased 230% and corn production increased 200%.

The state of Mato Grosso is the leading grain producing state in Brazil and it is located further from Brazilian ports than any other major producing state. Currently, the only railroad in the state is in the southeast corner of the state and it has only made it approximately 150 kilometers into the state. Two grain terminals along the railroad are already in operation at Alto Taquari and Alto Araguaia and a third at Itiquira is already built and awaiting the final OK to begin operations. A fourth grain terminal will be built at Rondonopolis where the train is expected to arrive in 2013.

After Rondonopolis, the railroad is projected to make its way to the state capital of Cuiaba located 210 kilometers northwest of Rondonopolis. The state Secretary of Logistics has announced that he has obtained funding to conduct the environmental impact studies needed to extend the railroad to the capital.

American Latina Logistica is the only company allowed to build and operate the railroad at least until it reaches the state capital. From that point forward, the bidding process will be opened up to competing companies. The long range plan for the railroad is to extend it from the state capital of Cuiaba straight north to the Amazon port city of Santarem, a distance of 1,470 kilometers.

This railroad has been talked about in Brazil for decades and yet only 150 kilometers of track have been laid within the state of Mato Grosso and there are 1,745 kilometers yet to go before it reaches the Amazon River. In other words, it is only 8% complete after decades of work.

Due to the slow pace of progress, from Cuiaba north to the Amazon River, the building concession will be opened up to other bidders in addition to American Latina Logistica. A Chinese company has already done preliminary work concerning the proposed route and has expressed a desire to bid on the project. The final decision on who will be awarded the contract to build the railroad, or if it will be built at all, is still several years away.