January 31, 2011

Construction to Begin on Third Grain Terminal in Mato Grosso

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

America Latina Logistica (ALL) is slated to start construction on its third grain terminal in Mato Grosso in February. The terminal will be built 14 kilometers outside of the city of Itiquira in southeastern Mato Grosso. The company already operates two grain terminals in the state at the cities of Alto Araguaia and Alto Taquari. The new terminal will occupy a 73 hectare site which was donated by the local municipality as part of the financial package extended to the company to locate the facility near the city. The agricultural products expected to move through the facility includes: soybeans, corn, cotton, soybean meal, soybean oil, ethanol, pulp wood, refrigerated containers, petroleum products, and fertilizers.

The terminal will have the initial capacity to load one 120-car train per day with the possibility of expanding in the future to two 120-car trains per day. It will have a permanent workforce of 200 employees. ALL is currently laying track from Alto Araguaia to Itiquira and the rail line is expected to arrive in Itiquira in late 2011 or early 2012.

From Itiquira the rail line will continue another 76 kilometers to Rondonopolis once the Brazilian Environment Agency gives their final OK on the project. The arrival of the Ferronorte Railroad in Rondonopolis has been delayed for over a decade due to financial problems at ALL. When the construction crews are in full operation, they can lay one kilometer of track per day.

Local authorities are hoping that the arrival of the railroad will spur additional industrial development in the region. The area is heavily dependent on agricultural production such as soybeans, corn and cotton as well as cattle ranching.

Farmers are also hoping that the railroad will lower their high transportation for both grain and inputs, but the anticipated cost savings may be disappointing. At the other two grain terminals in Mato Grosso operated by ALL, the freight rates for transporting soybeans to the Port of Santos using the Ferronorte Railroad are only 2-3% less than trucking the grain to the port. The lack of significant savings is the result of ALL being the only railroad in the state and without any competition; there is little incentive for lowering the freight rates.

One unique feature of the Ferronorte Railroad is the fact that the railroad ties are made of concrete instead of the traditional wood. Concrete is used due to the prevalence of termites in this tropical climate. The actual rails themselves have been imported from Japan.