December 20, 2017

Cargill, ADM, Bunge, Amaggi interested in Railroad in Brazil

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

Four big international grain companies including: Cargill, ADM, Bunge, and Amaggi are interested in forming a consortium that would bid on constructing what is being called the "Grain Railroad (Ferrograo) in northern Brazil that would link the grain producing regions of Mato Grosso with ports on the Amazon River.

The 1,100 kilometer railroad with an estimated cost of R$ 14 billion ($4.24 billion using an exchange rate of 3.3 Brazilian reals to the dollar) would connect the northern Mato Grosso city of Sinop with the Port of Itaituba on the Tapajos River. From there, the grain would be barged to various ports on the Amazon River.

Bids on the project will be accepted in 2018 and the winning bidder will be allowed to collect the revenue from the railroad for a 65 year period. The state of Mato Grosso is Brazil's largest producer of soybeans, corn, cotton, and cattle. Currently, the majority of the grain exported from Mato Grosso leaves Brazil through export facilities in southeastern Brazil. If the grain is shipped north on this proposed railroad, transportation costs could be reduced 40%.

The Brazilian National Land Transportation Agency (ANTT) held its fourth of six public meeting last week concerning the proposed railroad. Three other meeting have already been held in Belem, Para, Sinop, Mato Grosso, and in Brasilia. Two meeting scheduled for the cities of Itaituba and Novo Progrosso in the state of Para were suspended. The two suspended meeting were on the proposed path of the railroad and they were suspended when local indigenous communities said they would block the entrance to the meeting site. In order to avoid a confrontation, the meetings were suspended.

As you can see from the suspended meetings, the indigenous communities in the area are not "on-board" with the railroad. Some subsistence farmers and extracting communities (timber, gold, and minerals) are also opposed to the proposed path of the railroad. The railroad would pass through an existing national park and in order to have no net loss of park land, an equivalent size area would be set aside for a park. That is the area where the subsistence farmers and extractors claim their livelihood would be destroyed.

Construction may start in 2020 after the appropriate environmental licenses are obtained and the construction is expected to take five years to complete barring any unforeseen problems.