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February 20, 2017

"Grain Railroad" and BR-163 Key to Moving Grain North in Brazil

As each growing season passes in Brazil, the production of soybeans and corn continues to increase. Additionally, more of the grain is moving northward to new ports on the Amazon River and in northeastern Brazil instead of the traditional ports in southern Brazil.

Conab recently released a study titled "Export Estimates for Soybean Complex and Corn from Brazil's National Ports: 2016/17 Harvest. According to the study, 75% of Brazil's 2016/17 soybean and corn exports will leave the country via the major ports in southeastern and southern Brazil with 23.8% leaving via the Northern Arc of ports. This is the most ever for these northern ports and they are expected to continue to take market share away from the traditional southern ports. It is estimated that moving grain out of these northern ports will save approximately 40% on transportation costs.

The director of the Pro-Logistic Movement and the Agricultural Logistical Division of the Ministry of Agriculture, Edeon Vaz, recently stated the key for moving grain north instead of south in Brazil is the completion of highway BR-163 from Mato Grosso northward to the city of Santarem on the Amazon River as well as the completion of what is being called the "Grain Railroad", which will also connect Mato Grosso and the Amazon River.

He feels the sections of BR-163 within the state of Para will be completed by the end of 2018, although the completion date keeps getting pushed back due to financial problems encountered by two companies that could not complete their sections of the highway.

The "Grain Railroad" is a proposed railroad from the city of Sinop in northern Mato Grosso to the city of Santarem on the Amazon River. The cost of the Grain Railroad is estimated at R$ 10 billion, but that may be a gross underestimate given the recent history of cost overruns in Brazil on construction projects. The Brazilian government is expected to start the bidding process on the Grain Railroad sometime in 2017. The construction timetable for the railroad is estimated at five years, but once again, that is probably optimistic.

As part of the Grain Railroad is the idea of installing a "dry port" at the city of Sinop in northern Mato Grosso. The dry port idea is being promoted by the Brazilian Minister of Agriculture and the senators from Mato Grosso. The advantage of a dry port would be to streamline activities such as grain inspections, grain testing and certification, import and export taxes, and other export activities. All the major grain companies such as, ADM, Cargill, Bunge, Louis Dreyfus, and Amaggi are in support of the Grain Railroad.

There are five major grain ports and numerous barging operations on the Amazon River and all five of these ports are being upgraded and expanded. Eventually, it is expected that a majority of the soybeans and corn produced in north-central Brazil will move north to the Amazon River instead of south to the ports in southern Brazil