Nov 09, 2009
Cost Of Transporting Soybeans Out Of Central Brazil Will Likely Increase
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The heavy reliance on truck transportation to move grain and agricultural products in and out of central Brazil has farmers, ranchers, agricultural processors, and grain companies searching for viable alternatives to this slow and costly way of moving a bulk commodity such as soybeans. In Mato Grosso for example, more than 60% of all the grain shipments move via trucks followed by rail and then barge. Approximately 70% of all the truck transport in the state is grain shipments. During the peak harvesting period in Mato Grosso (February to April) when trucks are in high demand, it can cost as much as US$ 2.75 to 3.25 to move a bushel of soybeans from central Mato Grosso to the Port of Paranagua in southeastern Brazil. That cost could go even higher due to rate increases requested by the trucking companies.
The 700 trucking companies that operate in Mato Grosso are threatening to raise rate due to the high cost of fuel, increased maintenance costs, and the ever-increasing salaries of their drivers. Fuel has always been expensive in Brazil and now salaries are becoming a bigger concern. Since 2004, the minimum salaries for drivers, which is set by the federal government, has risen 62% from R$ 559 a month to R$ 910 a month. Recent rule changes by the federal government limiting the amount of time a driver could be behind the wheel between rests, will aggravate the situation even more.
Trucking companies also site poor road conditions as a contributing factor of the rising cost of operating a grain hauling tuck. The poor roads increased maintenance costs and cause more frequent tire replacement. According to the state trucking association (Associacao dos Transportadores do Cargas do Estado ATC), it costs R$ 4.64 to operate a grain-hauling truck per kilometer when making a round trip between Mato Grosso and the Port of Paranagua, yet they only get paid R$ 3.80 per kilometer. If they can find a load to back haul, they can make money, if not they probably loose money.
The cheapest way to move a bulk commodity such as soybeans out of the state would be by barge. Estimates are that it cost eight times more to move soybeans by truck than it would cost to move them by barge northward to the Amazon River. Unfortunately, there are no large-scale direct barging operations from the state of Mato Grosso to the Amazon River. One barging operation on the Madeira River has been up and running for many years but it is in the neighboring state of Rondonia and the soybeans must be trucked to that state before they are put on the barge. Two other barging possibilities are being discussed; one using the Teles Pires-Tapagos Rivers and the other on the Tocantins-Araguaia Rivers, but both of these will only carry large volumes of grain sometime in the future.
The quickest alternative to trucking would be increasing the amount of grain moved via rail transport. The Ferronorte Railroad is in operation in southeast Mato Grosso and moving soybeans to port by rail costs only one third as much as moving it by truck. Unfortunately, the railroad only extends about 50 miles into the state of Mato Grosso and any further extension of the railroad has been delayed by financial difficulties. The operator of the Ferronorte Railroad, America Latina Logistica, now claim that their financial difficulties are behind them and that they will resume construction as soon as the end of 2009, but most observers will only believe it when the construction actually resumes.
In the mean time, transporting soybeans out of central Brazil is going to continue to be slow and expensive and without a major improvement in the transportation infrastructure, it could limit soybean expansion in central Brazil.