Jan 30, 2015

More Investments Announced for Brazil's "Northern Arc"

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

One of the most significant advances in Brazilian infrastructure improvements in recent years has been the developing interest in what is called the "Northern Arc". This is a series of river ports on the Amazon River and ocean ports in northern Brazil including the barging operations needed to move the grain north to the ports.

The biggest investment will be in developing barging operations on the Tapajos-Amazon Rivers between Miritituba, which is located on the Tapajos River (a southern tributary to the Amazon River) and the Port of Vila do Conde, which is located at the mouth of the Amazon River near the city of Belem. Soybeans and corn produced in Mato Grosso will be trucked northward on highway BR-163 (approximately 1,000 kilometers depend on where the grain is produced in Mato Grosso) and then loaded onto barges at Miritituba for the 1,200 kilometer trip to the mouth of the Amazon River where they will be loaded onto ocean going vessels.

Numerous grain companies are already in the process of constructing the needed facilities for this new river system and Bunge's system is already operational.

The company Hidrovias do Brazil recently announced an initial investment of US$ 300 million for the first phase of their barging operation between the city of Miritituba and the Port at Vila do Conde. According to a report in the newspaper O Estado de Sao Paulo, in addition to the construction of a grain terminal at Miritituba, the company will purchase 100 to 150 barges and 5-7 tugboats from domestic suppliers. The company envisions a total investment of R$ 1.4 billion in the system which will eventually transport 5 million tons of grain per year when fully operational.

This "Northern Arc" of ports will require billions of additional investments in expanding the capacity of the Port of Vila do Conde (mouth of the Amazon River), the Port of Santarem (east-central Amazon River), the port of Itacoatiara (central Amazon River), and the river port at Porto Velho on the Madeira River in the western Amazon region.

Eventually, the majority of grain produced in Mato Grosso and central Brazil will flow northward to the Amazon instead of being trucked or railed southward to the big ports in southeastern Brazil. This will result in lowered transportation costs and improved margins for farmers as well as helping to ease the chronic congestion at the southern Brazilian ports.

In their latest report, Conab estimates that the grain acreage in Mato Grosso increased from 13.3 million hectares in 2013/14 to 13.6 million hectares in 2014/15. The total grain production in the state is expected to increase 4.4% in 2014/15 to 49.7 million tons.