Feb 11, 2014

President Rousseff to meet with Farmers in Mato Grosso Today

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

President Dilma Rousseff will be in Lucas do Rio Verde today to kick of the Brazilian soybean harvest. This central Mato Grosso municipality generally plants some of the earliest soybeans in Brazil and thus the harvest starts early as well. Approximately 22% of the soybeans in Mato Grosso have been harvested. She is scheduled to meet with various agricultural groups to discuss the government's plans to aid the agricultural sector and to improve the lagging logistics in Brazil.

One of the farmer's main concerns is the low prices being paid for corn produced in the state. An excess of corn and falling international corn prices forced many farmers to sell last year's corn production at a loss or to sell it to the government at the minimum price of R$ 13.00 per sack of 60 kilograms or approximately US$ 3.00 per bushel. The government conducted a series of auctions last year where they purchased 8 million tons of the 22 million tons of corn produced in the state.

At these auctions the government paid R$ 13.00 per sack of 60 kilograms (approximately US$ 3.00 per bushel) and the farmers indicate that they now need R$ 15.00 per sack just to cover the higher cost of production. They also want the government to establish a more consistent policy on corn prices to assure farmers that they will be able to sell their corn for at least break even prices.

Improvement in Brazil's logistics will also be high on the agenda especially completion of highway BR-163 linking Mato Grosso with ports on the Amazon River. Work on paving the highway started three years ago, but it has run into a series of delays and cost overruns. Of the nearly 1,000 kilometers, 40% still needs to be asphalted and numerous bridges still need to be built.

The basic problem is that the project was sectioned off and companies could bid on building one or more sections. Some of the companies that won the bids were woefully underprepared to build a highway through the Amazon Rain Forest and several companies declared bankruptcy shortly after work began. Work on these sections of the highway has stalled while the companies slowly work their way through the court system.

The farm organizations will be asking the President to give more leeway to bypass the notoriously slow judicial system in Brazil and find a way to complete the project. The latest assessment from the National Department of Infrastructure and Transportation (Dnit) is that work will be completed sometime in 2015, but that is no guarantee.

Once the highway is completed it will be turned into a toll road, but the process of selecting a company to operate the road has not even begun and the farm organizations will ask the President to speed up the process.

The new highway will intersect the Tapajos River in the state of Para and numerous grain companies are already constructing grain and barging facilities on the river in anticipation of the highway being completed. The Tapajos River is a tributary to the Amazon, but until the highway is completed, only a small amount of soybeans will be shipped north to the barging operations. Once all these facilities are in full operation, the majority of grain produced in central and northern Mato Grosso will be exported out the Amazon River instead of ports in southern Brazil.