May 01, 2014
Amazon River Route Inaugurated for Brazilian Soybean Exports
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
After years of studies indicating that exporting grain out the Amazon River would be a much better option than exporting grain from ports in southern Brazil, significant progress is finally being made on this northern route, which one day will be a major export route for Brazilian soybeans and corn. Last week, the first vessel loaded with grain from the Port of Vila do Conde set sail inaugurating the newest export facility in northern Brazil. The ports of Santos and Paranagua in southern Brazil will remain important export facilities, but the Port of Vila do Conde is destined to be Brazil's major grain port in the decades to come.
The newest facility at the Port of Vila do Conde was built by Bunge at the city of Barcarena, which is right next door to the much larger city of Belem located at the mouth of the Amazon River. Bunge's grain terminal has been named Terfron which stands for the Northern Frontier Port Terminal (Terminal Portuario Fronteira Norte). Soybeans exported from this port were produced in the state of Mato Grosso in central Brazil. The soybeans were then trucked north on highway BR-163 to the Port of Miritituba on the Tapajos River where they were loaded onto barges and transported to the Port of Vila do Conde near the mouth of the Amazon River. At that point they are loaded unto Panamax-size vessels destined for China and Europe.
Bunge's Terfron facility is expected to handle 2 million tons in 2014, 4 million in 2015, and 8 million by the year 2018. Eight million tons will be a significant milestone because that is how much was exported in 2013 from Bunge's facility at the Port of Santos in southern Brazil. Bunge is just one of many grain companies set to utilize this same Amazon River route to export grain. It is estimated that the Port of Vila do Conde will be Brazil's largest grain port by the year 2020 when an anticipated 22 million tons of grain will move through the port, surpassing the Port of Santos.
Utilizing this northern route will reduce the time needed to ship grain to Europe by 20% and by 15% to China. The reduction in transportation costs is estimated to be approximately 34%, but that will be dependent on how much it costs to export grain out of southern Brazil.
Bunge is just the first company to have all the facilities in place to utilize this Amazon River route. Seven other companies are currently in the process of constructing similar facilities along the route at an investment of over R$ 6.2 billion.
The most expensive link in this entire system is the need to truck soybeans the first 1,000 kilometers from the fields of northern Mato Grosso to the Port of Miritituba on the Tapajos River. As a way to reduce this cost, the major grain companies in Brazil (ADM, Bunge, Cargill, Dreyfus, and Amaggi) are petitioning the federal government to construct a railroad from Sinop in northern Mato Grosso to the Port of Miritituba. If this railroad is built, grain would move by rail and barge through virtually the entire system, thus eliminating the need for trucking, which is the most expensive way to move grain.
Total exports of soybeans and corn from Brazil are expected to double from 65 million tons to 110 million tons over the next decade and this northern route will be a critical factor in helping Brazil stay competitive in world grain markets.