April 30, 2012

Barging Could Significantly Lower Transportation Costs in Brazil

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

Soybean producers in Mato Grosso are pushing for the construction of a barging operation linking the northern regions of the state with the Amazon River. The logical route for the barging operation would be on the Teles Pires and Tapajos Rivers which start in Mato Grosso and ends at the Amazon River at the city of Santarem. There are already grain facilities at the Port of Santarem which will be expanded to coincide with the completion of an asphalted road from northern Mato Grosso later this year. There are a few barges that currently transport soybeans to the port, but they come all the way from the western Amazon state of Rondonia. If the proposed barging operation was operational, it would represent a major outlet to world markets for soybeans produced in the state.

A group of soybean farmers, known as Pro-Logistics, estimates that the cost of transporting soybeans from northern Mato Grosso to the ports in southern Brazil can be as high as US$ 120 per ton, but if the proposed barging operation was in place, the cost could be reduced to an estimated US$ 56 per ton. For the soybean farmers in Mato Grosso, that would represent a savings of R$ 1.9 billion per year in transportation costs.

Few soybeans are grown in far northern Mato Grosso because of the high cost of transporting the soybeans to ports in southern Brazil. With the barging operation in place, it is estimated that 9 million more hectares of row crops (primarily soybeans) could be grown in the state without clearing any new land just by using existing pastureland. In fact, most of the expansion of soybean acreage in the state over the last several years has been from the conversion of degraded pastures to additional soybean production.

The total cost for the barging system is roughly R$ 7 billion, but that could be made up in cost savings in just four years. The Minister of Transportation in Brazil has already allocated R$ 2 billion for the construction of four locks on the Tapajos River, but the Pro-Logistics group wants the system operational all the way to northern Mato Grosso. Currently, only 280 kilometers are navigable and with the entire system in place, there would be 1,400 kilometers of navigable rivers.

Currently, in all of northern Brazil, there is just one lock located on the Tocantins River. If everything would go according to the wishes of the Pro-Logistics group, the four locks on the Tapajos River would be ready in 2018 and the entire system all the way to northern Mato Grosso would be operational in 2025.