May 02, 2016

Railroads expand their share of Grain Transport in Brazil

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

The railroads of Brazil are transporting more grain than ever before, but the sector still faces big challenges in keeping up with the ever-expanding agricultural production in Brazil. According to the National Association of Railroad Transporters (ANTF), 25% of the grain produced in Brazil is now being transported by rail, or 53.7 million tons in 2015, which is a record volume. The total grain production on Brazil in 2015/16 is estimated at 215 million tons.

The increased volume of grain being transported by rail in Brazil is benefiting not only the two largest grain ports in Brazil, which are the Port of Santos and the Port of Paranagua in southeastern Brazil, but also new ports such as the Port of Itaqui in northeastern Brazil. All three of these ports are reporting record amounts of grain arriving by rail.

America Latina Logistica (ALL) is the largest railroad in Brazil with 13,000 kilometers of track. In 2015, ALL transported 25 million tons of grain, which is a little more than half of its total volume. ALL transported 15 million tons of grain to the Port of Santos in 2015 and 7 million tons of grain to the Port of Paranagua. ALL is the only railroad currently servicing the state of Mato Grosso, which is the largest grain producing state in Brazil. On a daily basis, ALL sends out 9 unit trains of grain from Mato Grosso each with 80 cars for a total of 50,000 tons of grain. Each unit train is about enough to load one vessel and the equivalent of 1,400 trucks.

Another large railroad in Brazil is Valor Logistica Integrada (VLI) which operates 7,200 kilometers of track. The company indicated that in 2015 they transported 15 million tons of grain, which represented one-third of their volume.

According to the Agriculture and Livestock Confederation of Brazil (CAN), more than half of the soybeans and corn in Brazil is produced in the states of Mato Grosso, Goias, Bahia, Tocantins, Maranhao, Piaui, and Para, yet only 20% of the grain produced in these northern states is exported out of northern ports in Brazil.

VLI is one of the major railroads operating in northeastern Brazil and they continue to expand their operations moving grain north instead of south to ports in southeastern Brazil. In March, VLI inaugurated two new grain terminals along their rail line in the state of Tocantins. Rail cars loaded at these terminals travel north on the North-South Railroad to the ocean Port of Itaqui in the city of Sao Luis in the state of Maranhao. This port is already a major exporter of iron ore and it was recently expanded to handle grain as well. Once all the expansion projects are complete at the Port of Itaqui, it is expected to be the third largest grain export facility in Brazil.

ANTF expects rail transportation to continue expanding in Brazil, but at an uneven pace due to the many hurdles that must be overcome. The existing quality of track is poor compared to the U.S. and Argentina and there are a lot of other challenges such as: a shortage of grain cars, and a lack of spur lines and transfer points.