Feb 12, 2016

"Grain Railroad" to link Mato Grosso with the Amazon River

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian government is renewing its efforts to build a railroad from central Mato Grosso straight north to a tributary of the Amazon River in order to increase the shipments of soybeans and corn produced in Mato Grosso to export facilities on the Amazon River.

The proposed R$ 10 billion real project, nicknamed the "Grain Railroad" (Ferrograo) would connect the city of Lucas do Rio Verde in central Mato Grosso with the river port of Miritituba where numerous grain companies are constructing barging facilities. The proposed railroad would parallel highway BR-163 that is currently in the process of being asphalted from Mato Grosso to the Amazon River.

According to the newspaper Gazeta do Povo, the Brazilian government has awarded R$ 33 million for engineering, feasibility, and environmental studies concerning the railroad. Five years ago only 5% of the grain exports from Brazil moved through Brazil's northern ports, but in 2015 that had risen to 20% and it will continue to grow as more projects come on line.

If the railroad is built, it would provide producers in Mato Grosso with two alternatives for exporting their grain through the "Northern Arc" of ports instead of sending the grain more than 2,000 kilometers south to the ports of Santos and Paranagua in southeastern Brazil.

The port of Miritituba is located on the Tapajos River which is a southern tributary of the Amazon River. Grain would be put on barges at that location and barged down the Amazon River to ports near the city of Belem at the mouth of the Amazon River. Bunge already has a barging operation up and running at that location that is expected to transport 4 million tons annually when the project is completed. Hidrovias do Brasil (Waterways of Brazil) just announced that they are starting to receive grain at their barging facility at Miritituba and they will start loading vessels with soybeans by July with the eventual capacity to transport 6.5 million tons of grain annually.

Shipping grain north out of Mato Grosso would save approximately 30% compared to sending the grain south, but the completion of the proposed railroad is still many years away, if it is built at all. Until then, the best way north will be by truck on highway BR-163, but even with the new highway, it's not all positive. In order to pay for the asphalting, the road is being turned into a toll road and farmers are worried that the high toll charges will reduce the proposed savings.