March 11, 2014

Argentine Farmers have Lower Transport Costs than Brazilians

Farmers in Argentina continue to be frustrated by high taxes and an inept federal government, but one thing that helps them stay in business is low transportation costs. Their costs are low because of the close proximity of the production fields in Argentina to the export facilities.

The major export complex in Argentina is centered around the city of Rosario located on the Parana River. An estimated 80% of the soybeans produced in Argentina are grown within a radius of 300 kilometers from Rosario. This allows for easy and low cost transport from the field to the ports. In Argentina 87% of the soybeans arrive at the port by truck, 10% by rail, and 3% by barge.

In contrast, 60% of Brazil's soybeans are produced an average of 1,400 kilometers from the ports in southern Brazil. The majority of those soybeans are transported to the port by truck at a cost of US$ 2.00 to US$ 3.00 per bushel depending the distance and the time of shipment. A peak harvest times, the prices can spike even higher.

Another advantage in Argentina is the fact that many farmers have their own combines and trucks so they harvest the soybeans and haul it themselves to the ports. In Brazil, much of the harvesting is done by custom harvesting crews and virtually all the hauling of the grain is done by transportation companies.

Even though their transportation costs are lower, Argentine farmers labor under a crushing tax burden and a federal government that constantly interferes in the marketplace. The export tax alone on soybeans is 35% and when that is combined with other taxes and an unrealistic exchange rate, Argentine farmers receive less than half of the true value of their product.

Additionally, the Argentine government constantly meddles in the export markets by restricting exports in an attempt to hold down the rate of domestic inflation currently estimated at 25% to 30%. These export restrictions for wheat and corn for example, denies farmers from receiving the true value of their production.