Mar 09, 2010
Poor Roads In Brazil Add To Already High Freight Costs
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
For soybean producers in Mato Grosso, 2010 is not turning out to be a very good year. Even though their soybean yields are about average, the prices they are receiving for their soybeans are the lowest in several years and the cost to move their soybeans to export facilities has increased significantly this harvest season.
The cost to transport soybeans this year is 25% higher than last year. Freight costs have increased 12% just since January. A lack of trucks to move the huge crop is part of the reason why freight costs are so high. Another part of the high costs is increases in toll charges on the major highways of Sao Paulo and Parana. To complete a round trip between Mato Grosso and the Port of Santos in the state of Sao Paulo, the owner of a semi truck loaded with soybeans must pay R$ 1,095.50 or about US$ 600 per round trip just to cover the tolls. The toll charge amounts to approximately R$ 2 per sack or US$ 0.55 per bushel.
When you combine all the costs associated with transporting soybeans out of Mato Grosso to export facilities, it accounts for nearly 50% the total cost of producing soybeans in Mato Grosso. For every ten bushels of soybeans produced, five bushels goes to just covering transportation costs.
The poor condition of the roads leading out of Mato Grosso contributes to the high costs of hauling soybeans. Two thirds of the soybeans that are exported out of Mato Grosso move along highway BR-364, which links the two largest cities in Mato Grosso, Cuiaba and Rondonopolis. Fifteen thousand trucks per day move along that highway causing large backups and frustrating car traffic. The hilly terrain slows some of the older trucks that creep up the hillsides at less than 10 miles per hour resulting in huge backups and frustrated drivers. The lack of passing opportunities leads to many accidents, more than 100 per month between the two towns.
Some of the trucks are heading to the ports of Paranagua and Santos in southern Brazil and some of the trucks are heading to two rail terminals of the Ferronorte Railroad, which is located in southeastern Mato Grosso. Each rail terminal can unload about 700 trucks per day, but the number of trucks arriving at the terminals is much greater than that, which leads to waits of several days just to unload.
In addition to being the most costly way to move soybeans in Brazil, trucks in Brazil also leak soybeans as they travel down the pothole-filled roads. An individual truck can loose more than 100 kilograms of soybeans per trip or upwards of 4-5 bushels.
Correcting these logistical bottlenecks is going to take time. The most immediate relief will occur when highway BR-163 is completed linking northern Mato Grosso with the port city of Santarem on the Amazon River. Once completed in two or three years, it will shorten the distance to an export facility by 1,000 kilometers and reduce the cost of transportation by approximately 40%.