Jun 17, 2010
Lack of Infrastructure Costs Brazilian Farmers R$ 1 Billion
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Brazil has a huge amount of land that can be converted into new agricultural production, but ironically the most expensive place to grow soybeans in Brazil is on these newly cleared lands. The primary reason why it is so expensive to grow soybeans on these new lands is the ultra high cost of transportation needed to move the product to processors or export facilities.
According to the Mato Grosso Soybean Producers Association, soybean farmers in Mato Grosso loose approximately R$ 1 billion per year due to a lack of adequate infrastructure which drives up transportation costs. Approximately one third of the value of the soybeans is eaten up just by freight costs.
Barging is the most efficient way to move bulk commodities, but little barging is utilized in Brazil and even less is utilized in the state of Mato Grosso. In Brazil only 5% of the soybeans are transported by barge compared to 61% in the United States. In Brazil 67% of the soybeans are transported by truck compared to only 16% in the United States.
The second most economical way to transport bulk commodities is by rail. For decades, the dream of farmers in Mato Grosso was to have a railroad that could greatly reduce the cost of transporting their grain to export facilities. There is a rail line in southeastern Mato Grosso, but the expected savings on transportation have not materialized.
America Logistica Transporte operates the rail line in Mato Grosso. It has two terminals in the far southeastern corner of the state at the cities of Alta Taquari (ten miles inside the state) and at Alto Araguaia (sixty miles inside the state). These two rail terminals are considered the largest in the country and yet the terminal at Alta Taquari can unload only 300 trucks per day and at Alto Araguaia, the capacity is 600 trucks per day. In 2010, the rail line is expected to transport 10 million tons of grain the 1,400 kilometers from Mato Grosso to the Port of Santos in southeastern Brazil.
The expected big cost savings by utilizing the railroad to transport soybeans out of Mato Grosso just have not materialized. To move a ton of soybeans out of Mato Grosso by rail during the peak of the harvest season, it costs US$ 100 (approximately US$ 2.75 per bushel) compared to a cost of US$ 120 (approximately US$ 3.25 per bushel) to move the same ton of soybeans by truck.
For their part, America Logistica Transport, defends the high cost because of the huge investments that were needed to upgrade the tracks, build the terminals, and to purchase the engines and rail cars. The company claims that they have managed to reduce the time needed to move a trail from southeastern Mato Grosso to the Port of Santos from 240 hours to 96 hours.
Senators from the state of Mato Grosso have been pressuring the federal government to spend more on infrastructure. According to data from the Minister of Transportation, during the last two decades, Brazil spent 0.3% of its gross national product on infrastructure improvements. In comparison, during the decade of the 1970, the country spent 1.8% of its gross national product on infrastructure projects.