Feb 10, 2010
Lack Of Infrastructure Limiting Growth In Brazilian Grain Production
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The Brazilian Minister of Agriculture estimates that up to 20 million tons of Brazilian grain is at a distinct disadvantage compared to international competitors due to extremely high cost of transporting grain the long distances needed to reach Brazilian ports. The Minister estimates that transportation costs in Brazil are up to US$45 a ton more than its primary competitors. This loss of potential income is keeping Brazilian farmers from producing up to 3 million more tons of grain.
In recent years, the primary expansion of Brazilian grain production has been in the states of Tocantins, Piaui, Maranhao, and Bahia located in northeastern Brazil. It was argued that the primary advantage of producing grain in this region was the fact that it is much closer to ports in northern Brazil which would reduce the cost of transporting the grain. What they had not anticipated was the volume of grain that the ports were expected to handle and the lack of capacity at the ports.
The existing capacity at individual ports in northern Brazil was in the range of about 2 million tons of grain per year, but the needed volume was more in the range of 10 million tons per year. This has forced the grain merchants in the area to send their grain to southern ports such as Santos and Paranagua for export. The problem is that these northern areas are the points furthest away from the southern ports and the costs are the highest in Brazil. It is estimated that farmers in northern Brazil are losing approximately R$ 3 to R$ 4 per sack (US$ 0.80 to US$ 1.20 per bushel) due to the ports inability to move the desired volume of grain.