March 27, 2013

Trucking Grain North to Amazon River Still not Reality in Brazil

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

With all the congestion and delays at the ports in southern Brazil, one promised alternative for grain producers in central Mato Grosso is to transport the grain north to export facilities on the Amazon River. That has been the dream for more than 30 years as farmers wait for the completion of highway BR-163 from Cuiaba, which is the capital of Mato Grosso, to Santarem, a port city on the Amazon River.

From Cuiaba northward to the state line dividing Mato Grosso and the state of Para, BR-163 consists of 745 kilometers of two lane road intensely traveled by grain trucks and filled with axil-breaking potholes. From the state line to the Amazon River, there is another 1,094 kilometers. Sections of the highway in the state of Para are complete, but there are also approximately 600 kilometers where very little has been accomplished. These sections can be traitorously muddy in the rainy season and dust choked in the dry season. Completion of the highway is years behind schedule and the latest estimate is that it may be complete by the end of 2013, but that date may be pushed back as well.

Work on the highway started thirty years ago through central Mato Grosso. The region is part of the Mato Grosso Plateau, a generally flat and grassy savanna that stretches across central Brazil. The land was easily cleared and converted into millions of acres of soybean and corn production. The region now has numerous cities, spacious farms, and the accompanying grain elevators and processing industries.

Producers in Mato Grosso have invested heavily in new technologies that have doubled grain production in recent years, but the transportation system is the same as it was years ago when production was much less. During the 2011/12 growing season, the central and northern part of Mato Grosso produced 52% of the corn and soybeans produced in all of Brazil. The area produced more than 68 million tons of grain, which should have been a cause for celebration instead of a source of worry as to how to transport the grain to end users.

According to the Pro-Logistics Movement, which represents industries in Mato Grosso, the lack of alternative export routes has driven up the cost of transporting grain out of the region. The cost to move each ton of soybeans or corn to export facilities in southern Brazil is 425% more expensive than in Argentina and 370% more expensive than in the United States.

Once BR-163 is completed to the Amazon River, it could reduce transportation cost by 34% and save producers in the state R$ 1.4 billion. If a vessel left out of a northern Brazilian port, the sailing time to Rotterdam would be 3-5 days less compared to leaving from the Port of Santos in southeastern Brazil, resulting in even more savings.

Completion of the highway will not solve Brazil's logistical problems, but it could help take some of the pressure off of the overburdened highways leading to the congested ports in southern Brazil. Export facilities along the Amazon River will also need to be expanded as quickly as possible in order to handle the millions of tons of soybeans and corn expected once the highway is completed.