Brazil's Transport Handicap
Marcia Zarley Taylor DTN Executive Editor
Wed Nov 26, 2014 06:32 AM CST
(Page 1 of 2)

HADDONFIELD, N.J. (DTN) -- The U.S. transportation system may be creaky, but it works far better than the so-called "roads of death" Brazilian truckers must use to haul soybeans to export markets. Despite decades of political promises, Latin American transport systems continue to lag.

Paranagua, the largest port in Brazil, lacks weather-proof covers for grain shipments, so work must halt when it rains. Such uncertainties led to an average of 15-day delays on shipments to Asia during 2009-2013, a recent study by HighQuest Consulting found. (DTN file photo by Kieran Gartlan)

Take the Brazilian boom town of Sorriso, Mato Grosso, which stood on the northernmost edge of the state's soybean frontier 15 years ago. It is as remote from the Atlantic port terminals as North Dakota is from Pacific Northwest ports, but back then, visiting U.S. farmers compared Sorriso to Decatur, Ill. Dozens of grain buyers lined Main Street. Bunge was building Latin America's largest soybean processing plant there complete with a rail siding, although no railroad existed in the entire state at the time. Whole beans had to be hauled 1,250 miles by truck to southern ports on the Atlantic, sometimes an eight- or nine-day trip. This meant Sorriso's local cash soybean prices remained some of the lowest in the world.

Fast forward to 2014. Very little has changed Sorriso's transportation handicap. Despite promises of paving highway BR 163 to new northern ports on the Amazon, completion is more than a decade behind schedule. A toll road can't get off the ground since truckers lack backhauls when they return south. Transporting soybeans by truck still accounts for 70% of Brazil's freight expense to get to the final export destination. That means it cost about $175 per metric ton to ship Sorriso's soybeans to Shanghai, China, between 2009 and 2013, versus $78 per metric ton for beans from Davenport, Iowa. The same trip from Mitchell, S.D., cost $85 per metric ton on average.

"The big problem is Brazil's road system is not sufficient to move beans from Mato Grosso to ports in the south, or to Amazon ports and barge systems headed north," said Bill Devens, managing director of HighQuest Consulting, a firm that recently finished a global study of export competitiveness for the U.S. Soybean Export Council and the Soy Transportation Coalition.

Compounding the issue is that truck lines at Brazilian ports sometimes run 30 miles long. Public berths in the ports of Santos and Paranagua lack cover for soybeans and corn that are being loaded onto ships. That means when it rains, loading stops and waiting vessels are subject to demurrage charges.

With South America's ocean port facilities subject to huge delays, "nobody knows whether beans exported from Brazil will arrive on time and predictability of delivery is very low," Devens said.

Based on HighQuest surveys for calendar years 2009 through 2013, soybean shipments from Brazil averaged 15-day delays from their expected arrival date, Asian buyers reported. Argentina averaged delays of seven days and the U.S. averaged three-day delays. Even with widespread 2014 railroad backlogs in the U.S., Devens doubts that scenario has changed much.

Punctuality is important for buyers who practice just-in-time delivery and keep inventories low. Soybean processors rely on predictable deliveries because it allows them to match purchases and sales. If a shipment is delayed, they may need to purchase soybeans at higher prices in the open market to replace the shortfall. This can lead to substantial financial losses for the processor and can also lead to reputational risk for the processor from its clients, Devens said.


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