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September 9, 2016

Tolls Increase in Brazil, Farmers could Pay $ 0.90 per/bu Just in Tolls

As part of the country's infrastructure improvement program in Brazil, many of the major highways in the country are being converted into toll roads in order to generate the income necessary to expand and improve the roads. The toll roads are operated by private companies with long term leases of generally 30 years with the companies being responsible for the highway improvements. A good example of this program is highway BR-163 which runs the entire length north-to-south of the state of Mato Grosso.

BR-163 is often referred to as the "soybean highway" because it is the primary highway in the state and the major entrance and exit point for a state that is as big as the entire U.S. Midwest. The state of Mato Grosso is Brazil's largest producer of soybeans, corn, cotton, sunflowers, and cattle and approximately 60% of the grain in the state is transported by truck, mostly along highway BR-163.

Eight hundred kilometers of BR-163 from the city of Sinop in the northern part of the state southward to the border with the state of Mato Grosso do Sul has already been converted into a toll road with the tolls being used to convert the highway from a 2-lane road full of potholes to a limited access 4-lane highway with an improved roadbed. The National Land Transportation Agency (ANTT), which is authorized to set the tolls, recently announced an increase in the tolls that took effect September 6th.

There are nine toll plazas along highway BR-163 within the state of Mato Grosso and the tolls for passenger cars is now R$ 43.60 to travel the entire 800 kilometers. Using an exchange rate of 3.2 Brazilian reals per dollar, the tolls converts to $13.62 per passenger car.

For soybean and corn farmers in the state, they are concerned about the cost of transporting their grain along the highway. The largest semi-truck with two trailers and six axles pays six times more than the cost of a passenger car. For the entire length of the highway, the largest semi would pay R$ 261.60 in tolls or approximately $81.75. That would equate to approximately 0.16 cents per bushel just to pay the tolls to go one way within the state of Mato Grosso.

The two main ports in Brazil are the Port of Santos and the Port of Paranagua and both of these ports are about 2,200 kilometers from the city of Sinop and there are tolls along nearly the entire route from Mato Grosso to the ports. The cost of the tolls to transport grain to the ports is approximately $ 0.44 per bushel one way, but the truck must also pay the toll on the return trip. Therefore, if the truck returns empty, the total charge for tolls could be as high as approximately $ 0.90 per bushel. That is just for the tolls and it does not include the freight charge.

Farmers in the state have always pushed for better highways of course, but they were adamantly opposed to the conversion of the highways in Brazil to toll roads because they knew that they would pay the tolls in the form of lower prices paid to tem by the grain companies or the transportation companies. They argued that they were already paying for the highways through their taxes.

The transportation companies can pass along their toll costs to the farmers and in exchange, they are getting a better highway which improves efficiency and lowers their operating costs. Good news for the truck owners, not so good for the farmers.