September 26, 2013

Infrastructure Improvements in Brazil Could Save US$ 70 per Ton

At a recent forum held in the city of Sinop in northern Mato Grosso, data was presented that indicated that soybean farmers in the state of Mato Grosso could save US$ 70 per ton of soybeans if the state had an adequate infrastructure to store and transport its ever expanding agricultural production. According to Mauricio Tonha, a soybean producer and prior mayor of the city of Agua Boa in eastern Mato Grosso, that amount of savings on the 45 million tons of grain produced in the state would inject US$ 3.1 billion into the state's economy annually.

The amount of savings would grow even larger as the grain production increases. The Mato Grosso Institute of Agricultural Economics (Imea) estimates that the state's grain production will reach 100 million tons within ten years and at that point, the savings resulting from improved infrastructure could amount to US$ 7 billion annually.

The Director General of Brazil's National Infrastructure and Transportation Department, Jorge Fraxe, indicated that 58% of the cargo in Brazil is transported by truck, 28% by rain, and 13% by barge. Truck transport is the most expensive way to move grain over long distances and that is why it costs approximately US$ 133 per ton to move grain from northern Mato Grosso to ports in southern Brazil compared to US$ 43 per ton to move grain from the interior of the state of Parana to the Port of Paranagua.

The inefficient transportation system also makes Brazil much more expensive compared to its neighbor Argentina. The cost to move a ton of grain from Sinop in northern Mato Grosso to a port in China is US$ 190 per ton compared to US$ 102 per ton from the interior of Argentina.

The Brazilian government has been slowly trying to address these infrastructure deficits by building railroads and asphalting highways, but they can never quite catch up because the grain production in Brazil has been increasing faster than the infrastructure can be improved.

One improvement recently approved is at the Port of Paranagua where the governor of the state of Parana will announce next week the start of three projects to improve the port's efficiency. The R$ 175 million investment, which is the largest investment at the port in 40 years, will consist of three parts. The first part will be the dredging of the channel leading to the port and as well as dredging of the berths. The second part will be the construction of four new ship loaders for the Public Corridor to increase loading capacity. The third aspect of the project will be the reconstruction of several of the roadways leading to the port to improve traffic flow.

The Port of Paranagua is the principal grain port in Brazil and the primary entryway for fertilizer imports into Brazil.