September 9, 2011

Grain Transportation Costs in Brazil are 43% Higher than in U.S.

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

Brazilian soybean and corn producers have known for a long time that they have a disadvantage compared to U.S. producers due to the extremely high transportation costs in Brazil. In fact, they have even coined a term for it called the "Brazil Cost." The reason for the high cost is the lack of efficient transportation systems to move the agricultural production from the vast interior of the country to the distant Brazilian ports.

To move a ton of soybeans from the interior of Mato Grosso to Shanghai, China, it cost approximately US$ 174.00 per ton. This is 43% higher than what it would cost to move soybeans an equivalent distance in the U.S., which would be from Minnesota to Shanghai.

The difference is the result of how the soybeans are moved. In the United States, 61% of the grain moves to market by barges, 23% moves by rail, and 16% moves by trucks. It is completely the opposite in Brazil where 60% moves by truck, 33% moves by rail, and 7% moves by barge. While these numbers illustrate the stark differences between the two countries, a closer examination of the numbers makes the differences seem even greater.

When grain is moves by truck in the U.S., it usually travels a relatively short distance from the farm or grain elevator to either a nearby rail or barge terminal. In Brazil, if the grain moves by truck, it usually is for a very long distance from the grain elevators all the way to the ports. Additionally, diesel prices in Brazil are higher than in the U.S. making the costs differential even greater.

Based on information obtained from the National Aquatic Transportation Agency (Antaq), the Mato Grosso Institute of Agricultural Economics (Imea) estimates that in Brazil it costs US$ 17.00 to move a ton of soybeans by barge, US$ 55.00 per ton by rail, and US$ 65.00 per tons by truck.

Improvements in the transportation systems in Brazil have been very slow to develop. Some additional rail lines are being built in the interior of the country and some additional highways are being asphalted, but it has only been incremental improvements. In the meantime, Mato Grosso remains one of the most expensive regions in the world to grow soybeans primarily due to the transportation costs.