October 16, 2015

Brazilian Soybean Producers at Disadvantage due to High Freight

Brazilian farmers have long known that the high cost of transportation in Brazil puts them at a competitive disadvantage compared to their main competitors - farmers in the United States and Argentina. According to a study conducted by the Logistics and Infrastructure Committee of the Agriculture and Livestock Confederation of Brazil (CNA), on average, it costs Brazilian farmers US$ 92 dollars a ton to transport their soybeans from the farm to export facilities in Brazil, which is approximately four time more than it costs in the United States and Argentina.

The costs are even higher for producers in Mato Grosso which is situated further away from the ports. The CNA study estimates that it costs US$ 126 per ton to transport soybeans from Sorriso, Mato Grosso to the Port of Santos, which is located more than 2,000 kilometers away in southeastern Brazil. The high cost is due to relying on trucks to transport 60% of Brazil soybeans instead of barges or railroads which are much cheaper. Highway transport in Brazil is also more expensive than it needs to be due to the poor condition of the nation's highways.

If those soybeans could be exported out of facilities on the Amazon River or in northeastern Brazil, it is estimated that the costs would decline to US$ 80 per ton or a saving of US$ 46 per ton. Farmers in Mato Grosso are eagerly awaiting the completion of highway BR-163 from Mato Grosso northward to the Amazon River. Once completed, soybeans would then be trucked from Mato Grosso to barging facilities being constructed on the Tapajos River, which is a southern tributary of the Amazon River. From there, the soybeans would be barged to ports near the mouth of the Amazon River near the city of Belem.

Details of the study were presented by Luiz Antonio Fayet as part of the Grain Market Day held recently in the city of Luis Eduardo Magalhaes in western Bahia. The meeting brought together 150 individuals including producers, technicians, and industry professionals to discuss the most pressing needs of Brazilian agriculture.

These new facilities are part of what is being called the "Northern Arc" of ports on the Amazon River and along the Atlantic Coast in northeastern Brazil. Eventually, it is expected that soybeans and corn produced north of 16 South Latitude will be exported out of these northern facilities instead of southern Brazil. This would include nearly all the grain produced in Mato Grosso, Goias, and northeastern Brazil.