August 19, 2011

Work on Brazilian Barging Projects Put on Hold

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

Farmers in central Brazil pay extremely high transportation costs to move their products into export channels due to a lack of needed infrastructure. One of the projects that they were hoping would help to lower their transportation costs was a barging operation on the Teles Pires/Tapajos Rivers that would transport soybeans from northern Mato Grosso to the Amazon port city of Santarem. Initial planning studies for the project have been put on hold and the project now runs a serious risk of not being included in the National Barging Program (PNH) due to spending cuts for the Accelerated Growth Program (PAC).

An additional blow to the hopes of Mato Grosso farmers was the recent suspension of work on the Tocantins Barging Project and work at the Port of Maraba in the city of Santarem, both of which are located in the state of Para. These projects were put on hold when widespread corruption was revealed in the Transportation Department. The corruption prompted the Brazilian president to suspend work pending a complete review of all the ongoing projects in the transportation department.

Both of these suspended projects were considered vital for producers in northern and northeastern Mato Grosso who want to export their soybeans via the Amazon River instead of the ports in far southern Brazil. Without viable alternatives, farmers in the state must continue to rely on the Port of Paranagua in the state of Parana and the Port of Santos in the state of Sao Paulo. The distance from central Mato Grosso to the Port of Paranagua is the equivalent of the distance from Minneapolis/St. Paul to Miami, Florida. Slightly more than 60% of the soybeans that are exported from Mato Grosso are transported to the ports via truck down two-lane congested highways. At the peak of the harvest, it can cost as much as US$ 3.50 per bushel to transport soybeans from central Mato Grosso to the Port of Paranagua.

The one infrastructure project that is scheduled for completion in 2012 is the asphalting of highway BR-163 that connects northern Mato Grosso with the Amazon port city of Santarem. Once completed, soybeans produced in northern Mato Grosso can be shipped north to the Amazon River cheaper than being sent to ports in southern Brazil, but still not nearly as cheaply as if they could be barged to the Amazon River.