February 28, 2013

Brazil Releases Ambitious Plan for Increased Barging of Grain

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

The National Agency for Water Transport in Brazil (Antaq) released its nationwide Plan for Integrated Barging (PHIN) in Brasilia last week. The ambitious goal of the plan is to transport 11% of the cargo by barge by the year 2020 in the six principal river systems in Brazil. These systems include: the Amazon in northern Brazil, southern rivers in southern Brazil, the Parana-Tiete in southeastern Brazil, the Tocantins-Araguaia in northern Brazil, the Parana-Paraguai in southern Brazil, and the Sao Francisco River in northeastern Brazil. Over the next seven years Antaq estimates that Brazil should add 5,000 more kilometers of barge navigation bringing the total to 25,000 kilometers.

Farmers in Brazil realize that they are at a disadvantage compared to their counterparts in the United States and Argentina due to the very high transportation costs in Brazil. American farmers have low transportation costs due to the Mississippi River which cuts through the heart of the grain belt. Argentine farmers have low transportation costs because 75% of the grain in the country is produced with a few hundred kilometers of the countrie's ports and farmers themselves can truck the grain to the ports. Brazilian farmers have the worst of both - their grain production can be a very long way from the ports (up to 1,500 miles) and the vast majority of grain still moves by truck to the export markets, which is the most expensive way to move grain.

Barging grain north to the Amazon River would be a particular benefit for farmers in northern Mato Grosso where soybean fields can be 1,500 away from the main Brazilian ports in southeastern Brazil. Most of the soybeans produced in Mato Grosso are transported by truck to the ports at a cost as high as US$ 3.50 per bushel. Barging the soybeans to the Amazon River would reduce those costs significantly and allow profitable soybean production at lower prices. Many farmers in Mato Grosso have stated that they have been lucky the last few years to have very strong soybean prices at the same time that transportation costs have soared. They are worried that soybean production could become unprofitable if prices fall but transportation costs remain high.

The Plan for Integrated Barging is still in its initial stages and it remains to be seen if the funding will be sufficient to achieve the ambitious goals of the plan.