Brazil's Transport Handicap 11/26 06:32
High-Speed Export Routes Still Under Construction
Reliance on trucks and inadequate ocean ports haunts Brazil's export
reputation. Farmers in its biggest soybean state have waited more than a decade
for a paved northern route to the Amazon.
By Marcia Zarley Taylor
DTN Executive Editor
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.
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
CRACKS IN U.S. TRANSPORT
Despite current U.S. advantages, a world-class river system and railroads
remain critical to keeping U.S. farm exports competitive long term. Over the
past two years, the Pacific Northwest route has experienced a 15% decrease in
train speeds, which has led to slower turn times for shuttle trains and
capacity reduction for grains moving to the PNW, the HighQuest report said.
That means turn times on shuttle trains have declined from three per month to
two, meaning less soybeans and corn are available for export. Beginning with
severe weather in early 2014, shippers in the Dakotas, Montana and western
Canada have complained that scheduled trains are running months late. Some of
those freight snarls have backed up traffic on the Mississippi, sending bids
for barges soaring.
Devens said the U.S. freight system is beginning to show cracks, both in
timely service and in the decaying facilities along the Mississippi. "There's
been more and more concern about the timeliness and predictability of freight
for grains along the rail lines and river system, especially due to increased
volumes of shale gas and its impact on the rail system and infrastructure and
volume concerns along the river system," he said.
Shippers in the Upper Midwest blame crude oil deliveries for clogging the
system. By their count, North Dakota's daily 1.2 million barrel production
equates to 1,714 tanker cars or 15-unit trains per day to transport it.
However, back-to-back record grain crops and a rebound in all shipping
categories are also straining the system, John Miller, BNSF group president for
agriculture, said at a Farm Foundation seminar last week. It's no coincidence
that all rail business is up, with 372,000 extra cars for containers just in
the first six months of the year. Grain shipments required an extra 119,000
cars during this same period, versus another 24,000 for crude oil and 41,000
Even with demand booming for rail service, the BNSF reported record
agricultural volume moving through the PNW during October and record shipments
from the Dakotas, Minnesota and Montana.
Small shippers remain the furthest behind -- those with fewer than 25-car
lots, or even single-car deliveries -- observed DTN Analyst Mary Kennedy, who
monitors transport issues on a weekly basis. "Railroads are double tracking and
putting together more shuttles, so they can move grain in volume. The problem
is that there are a lot of grains that don't move in 100-car units," Kennedy
Private railroads will eventually invest to fix the backlogs, most ag
industry leaders believe. Of greater concern to the soybean industry is
congestion on the Midwest's river system. Once the Panama Canal expansion
opens, the Soybean Transportation Coalition expects volume of grain and
oilseeds transiting the Mississippi to increase 30%. However, much of the
nation's barge infrastructure dates to the 1930s, leaving the system vulnerable
to sudden failures.
Despite the increased stress on the rail and river systems, Devens said the
majority of Asian clients surveyed view the U.S. as a more reliable supplier
than Argentina and Brazil.
"This predictability of delivery still provides an advantage to the U.S. It
is likely not going to change for the foreseeable future," Devens said.
To read the full HighQuest report, go to
To listen to the Farm Foundation's Nov. 19 transportation webinar go to
Read DTN's weekly transportation reports on the Market Matters blog.
Marcia Taylor can be reached at firstname.lastname@example.org
Follow Marcia Taylor on Twitter @MarciaZTaylor
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