March 11, 2013

Poor Roads Increase Cost of Transportation in Brazil

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

Farmers in Mato Grosso have benefited from the recent dryer weather and they have now harvested approximately 75% of their 2012/13 soybean crop. According to the Mato Grosso Institute of Agriculture Economics (Imea), the harvest pace is the most advanced in the center-north region of the state where approximately 90% of the crop has been harvested. In their latest assessment of the Brazilian crop, Conab is estimating that the state will produce 24.1 million tons of soybeans or 10.6% more than last year.

With the soybean harvest winding down and 98% of the safrinhacorn already planted in Mato Grosso, farmers are now concentrating on marketing their crop and the high cost of transportation. To illustrate their point, they staged a protest that closed highway BR-163 in three locations in Mato Grosso for several hours. The highway was closed at the town of Sorriso, Nova Mutum, and Lucas do Rio Verde. The president of the Mato Grosso Agriculture and Livestock Federation, which organized the protest, stated that their goal was to bring attention to the lack of investment on the part of the federal government to improve the highways in the state.

Highway BR-163 slices through the heart of the grain producing region of the state where 60% of the state's grain is grown. The poor condition of the road and the high amount of truck traffic not only increases the cost of transporting soybeans and corn, it also makes the road very dangerous. In 2012, there were over 1,500 accidents along the highway that resulted in 300 people being killed.

The National Infrastructure and Transport Department has announced that contracts have already been signed with two companies to resurface the highway between the city of Sinop and Posto Gil in central Mato Grosso at a cost of R$ 90 million. The work is scheduled to start as soon as the rains permit.

Farmers all across Brazil are facing high costs to transport their grain. The state of Parana has probably the lowest cost of transportation of any state in Brazil because the largest grain port in Brazil, the Port of Paranagua, is located within the state. Even with that close proximity to the port, it still cost R$ 8 to R$ 9 per sack to move corn from the western part of the state to the port or USD 1.80 to USD 2.00 per bushel. The cost of fuel, tolls, and port fees puts Brazil at a disadvantage compared to the U.S. and Argentina.