Oct 13, 2010
Transporting Grain in Brazil Four Times More Expensive Than in U.S.
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The president of the Agricultural Federation of Santa Catarina, Jose Zeferino Pedrozzo, stated that the top priority of the new Brazilian president should be an increase in infrastructure spending. He feels that a lack of infrastructure development and the resulting high cost of transportation are more important to Brazilian agriculture than foreign trade barriers or foreign subsidies.
A lack of adequate roads, railroads, barging operations, and ports has resulted in huge transportation cost increases in recent years. Between the years 2003 and 2009, the cost of transporting agricultural commodities to Brazilian ports increased an average of 147%, while at the same time inflation rose only 48%. During the same period, the cost of transporting agricultural commodities in the United States increased 16% and the cost of transporting agricultural commodities in Argentina increased 35%.
The primary reason for the huge increase in transportation costs is the fact that most of the agricultural expansion is occurring in central Brazil, far away from the Brazilian ports located in southeastern Brazil. For example, the distance from northern Mato Grosso to the Port of Paranagua is about the same distance as from St. Paul, Minnesota to Miami, Florida. Additionally, the cost of fuel in Brazil, either diesel or gasoline, is much higher than it is in the U.S. A typical price for a gallon of diesel fuel in southern Mato Grosso is US$ 4.90 a gallon and the price of gasoline is US$ 6.50 a gallon.
The average cost of transporting a ton of grain in Brazil to the Brazilian ports is R$ 135.60 per ton (approximately US$ 2.15 per bushel) compared to an average cost of R$ 31.18 per ton in the United States (approximately US$ 0.50 per bushel) and R$ 34.64 per ton in Argentina (approximately US$ 0.55 per bushel). The U.S. is cheaper because of its efficient transportation system and in Argentina the agricultural commodities only need to travel a very short distance from the field to the port. Brazil has the worst of worlds, long distances and inefficient transportation.
The poor quality of Brazilian roads also contributes to another problem in Brazil, a loss of grain in the transportation process. It is estimated that every truck load of grain losses 60 kilograms of grain (two bushels) between the farmers field and the port facility.
The lack of investments in infrastructure is evident when it is compared to Brazil's GDP. Currently, Brazil is investing 0.9% of its Grosso Domestic Product in infrastructure development, but many economists feel that it needs to invest 3% to 5% of GDP if it wants to stay competitive with the United States and Argentina, its two main agricultural competitors.