Infrastructure issues hamper Brazilian exports

30.05.2017

Truck on a scale with a soybean load in Brazil. The country is looking for ways to reduce its dependence on trucking for grain transportation.
 
Brazilian exports of soybeans are expected to reach record levels this year, putting the country’s creaking export infrastructure under huge strain. Exactly how much soybeans will be exported this season from Brazil was not clear in late March, but the U.S. Department of Agriculture (USDA) was estimating 61 million tonnes, while Brazilian sources expected 57 million tonnes. Either figure would represent a major jump from the 54 million tonnes exported in 2015-16 and a significantly higher mark than the 32 million tonnes exported in 2011-12.

In Brazil, both soybean production and export availability have soared in recent years. What has not kept in step is the country’s infrastructure, a problem analysts believe could become a major drag on the country’s agricultural sector and economic growth in the years ahead. This is also a source of concern for many importing countries, especially in Asia, which are relying on rising Brazilian exports to meet the changing dietary needs of their own populations in the coming decade.

These points were discussed at Global Grain Asia 2017 by leading executives from Alphamar Agencia Maritima, a Brazilian bulk cargo port and agency specialist with a heavy presence in the grains trade. David Ross, general manager, and Arthur Neto, company partner, took to the podium at the event, held in March at the Ritz-Carlton Millenia Singapore, and outlined how Brazil’s agricultural sector has a lot more to offer the world in the years ahead, but only if it can overcome its logistics challenges.

Obstacles and opportunities

“Due to the poor inland logistics and the heavy reliability on trucks, our inland logistics are less efficient and far more expensive than those of our main competitors — the U.S. and Argentina — who either rely on cheaper forms of transport like rail and waterways or, in the case of Argentina, benefit because farms are situated much closer to elevation facilities,” Ross said. “If we were able to rely more on rail and waterway transport, thus bringing the transshipment terminal closer to the origination areas, we would be able to reduce the overall FOB (Free On Board) price and in turn become more competitive in the international market.”

Ross and Neto argued that although Brazil was primarily known in bulk shipping markets for its huge iron ore exports, soybean exports, in fact, generated 6.7 times more revenue in 2015 because, per tonne, it was a far more expensive cargo than ore. Moreover, in the future it could be even more valuable to Brazil’s recession-struck economy. The executives forecast that national grains exports could rise by over 30 million tonnes in the next 10 years, but only if infrastructure was improved so growers could reach overseas markets at competitive prices.

“Demand is increasing due to the global appetite and Brazil is the only major producer that has available land for expansion and weather conditions that allow us to grow two crops per year,” Ross said. “Brazil also has a unique position, unlike our main competitors, where not only are we able to sustain two crops per year across the majority of the country, but also we have plenty of land for expansion. If we consider the new environmental legislation, and without cutting down even one tree, we have an expected area for expansion growth of around 9.7 million hectares, which is about the size of Portugal.

“This can be accomplished simply by changing our practices of cattle farming from less free roaming to more confinement methods, primarily in the region called Mapitoba.”

Drawing on Conab and Ministry of Agriculture data, the executives predicted that Brazilian maize exports would total 34 million tonnes in 2016-17, up from 20 million tonnes in 2015-16, and could rise a further 51.2% over the next 10 years. Soybean exports were forecast to reach 57 million tonnes in 2016-17, but a 33.9% increase in production over the next 10 years would enable a 42.1% increase in soybean exports. For soybean meal, they forecast that exports would remain steady at 15.5 million tonnes in 2016-17 but could rise 17.4% over the next decade.

The upshot of the predicted increases would be a 34-million-tonne increase in Brazilian grain and soybean exports over the next 10 years. But, Ross and Neto concluded, with many of the roads from Brazil’s agricultural heartlands congested, and ports in dire need of investment to boost capacity and productivity, these gains would only be possible if major investment from state and private sources was made in infrastructure and transport capacity, including new barge and rail systems.


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