December 9, 2010

Maker of Silo Bags set to Move into the Brazilian Market

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

Due to the chronic lack of storage space in Brazil, an Argentine company that makes silo bags is planning to open a production facility in southern Brazil to meet the expected increase demand for temporary storage of Brazil's grain crop. The company called Impesa Rio Chico, is headquartered in Buenos Aires and has been in business for 50 years. The company's main product is reinforced plastic bags that serve as horizontal grain silos. A typical bag that is 100 meters in length can store 200 tons of grain or approximately 3,000 sacks of 60 kilograms each. The main customers of the company are in Argentina, Uruguay, and Paraguay, but they also exported 20% of their 2009 production to 17 different countries.

During the last harvest season, the company sold 22 thousand units through 12 resellers and five equipment companies that sell the equipment needed to fill and empty the bags. Argentina is their main market, but they have also been increasing their sales volume in Uruguay as well. In fact, their products is widely accepted and liked in Uruguay because most of their customers are Argentine farmers that moved to Uruguay as a way to avoid the high export taxes imposed by the Argentine government (35% on soybeans exported from Argentina).

In addition to just general storage, the company feels one of their niche markets in Brazil could be the production of conventional soybeans and corn specifically produced for the European market. These non-GMO grains need to be kept identity preserved and silo bags could be used to do that. They could also be used to store specialty soybeans produced for the Japanese tofu market. The Brazilian government is also looking into purchasing the bags as a way to quickly expand the storage capacity of grain purchased by the government.

Before a production facility can be opened in Brazil, the company needs to resolve a question of how to call the silo bags that conform to import rules set by Mercosul. Under current rules, the bags would be considered flexible tubing similar to tubing used in industrial applications and as such, would be subject to an import tariff. The company maintains that is not the case, but a new category for agricultural use needs to be established in order to avoid the tariff.