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April 29, 2011

Lack of Infrastructure Limits Expansion in Northeastern Brazil

Brazilian farmers in recent years have been actively increasing their agricultural production in northeastern Brazil in the states of Maranhao, Tocantins, Piaui, and Bahia - sometimes called the MaToPiBa region. Production has been increasing in the region more as a function of increased yields and not expanded acreage. The reason for the slow development of the region is the lack of infrastructure, which continues to be a chronic problem in Brazil.

The farmers in the MaToPiBa region were very pleased with the weather during the past growing season and the resulting good yields. In the region where these four states meet, the total soybean production for 2010/11 is expected to be 7 million tons and for corn, 3 million tons are expected to be produced this growing season. Combined, this would represent an increase of 11% over 2009/10.

During the 2010/11 growing season, the area planted to soybeans and corn increased 170,000 hectares. According to the Minister of Agriculture, the farmers in the region need to increase the planted area 650,000 hectares per year for the next decade in order to reach the goal of 10 million planted hectares set by the Minister of Agriculture in 2008. The Ministry estimates that the region has the capacity for 20 million acres of crop production as it becomes the new agriculture frontier of Brazil.

The vegetation in the region is cerrado which is easily cleared and converted to agriculture production if there is adequate infrastructure to handle the increased production. Unfortunately, the lack of infrastructure has been what is holding back the expansion. All phases of infrastructure are inadequate including rural roads, federal highways, storage facilities, rail transportation, and port capacity.

The lack of capacity at the Port of Sao Luis is an example. Currently the port can only handle 2 million tons of grain per year, but it needs to be at least 6 million tons within a decade to handle the increased production. Currently grain trucks must wait several days to unload due to a lack of storage capacity at the port. A proposed east-west railroad will eventually bring even additional grain from the center-west region of Brazil to ports in the region.

Railroads and highways needed to transport the grain in the region are either still in the planning stages or behind in the actual construction.

In contrast, in the state of Parana crop acreage increased 20% over the last decade (1.17 million hectares) even though the state has little additional land for development. The increase came as a result of the conversion of pastureland into crop production. During the same period in the region of MaToPiBa, the crop acreage increased 1.4 million hectares even though there are millions of hectares of land that could be easily converted to crop production. At the current pace of infrastructure development, it will be many years before the agriculture in the region reaches its full potential.