South America Calling

Brazilian soybean and corn production will continue to expand over the next 10 years, but only as fast as logistics allow.

With major improvements in grain logistics still up to a decade away, Brazil will have to squeeze every last drop of capacity out of its overstretched port and terrestrial transport infrastructure.

"Up until now, poor logistics meant higher costs for producers. Now it is a real restriction on growth," said Andre Pessoa, director of Agroconsult, a farm consultancy.

He estimates that Brazilian soybean production will grow by around 50% over the next 10 years and corn output will rise by around 35%. A large percentage of this output will be for export.

But ports are already stretched to the limit in the immediate post-harvest period. The waiting time to load soybeans is currently 57 days at Paranagua port, and there is a chronic shortage of trucks in more remote regions of Mato Grosso.

According to farm leaders, the solution will be for Brazil to export soybean at top capacity later in the season.

"We are going to have to export 8-9 million tons in June and July as well as in April and May," said Pessoa, referring to the single month record for soybean shipments.

The main problem has always been that improvements in logistics always come after production, noted Aurelio Pavinato, chief executive at SLC Agricola, one of Brazil's biggest farms.

He agrees that Brazil's logistics outlook is critical but is hopeful that improvements will come in the two to three years that will help cope with extra output. A new port law could speed through the construction of new terminals in the north of the country and the completion of the BR-163 road (that links Mato Grosso to Amazon ports) will provide a route to reach them, he explains.

Time will tell, but perhaps Pavinato is being a little too optimistic. Even if the BR163 highway is completed by late 2014, as now forecast, it will take a long time to integrate the ports to export corridors.

Erai Magi Scheffer, Brazil's biggest individual farmer, bets on small improvements to port operations and to roads around western and eastern Cerrado as a means of increasing capacity while Brazil waits for bigger projects to come through.

However, none of the near-term improvements will reduce transport costs, which for Mato Grosso growers are four times higher than for their counterparts in the U.S. and Argentina.

Brazil takes so long to improve infrastructure not because of a lack of money, rather because of stifling bureaucracy and the lack of political will to blast past opposing regional interests.

The fact that the logistical chaos is currently featuring regularly in the local media may strengthen Brasilia's resolve to push projects through. That's the hope farmers have.

(AG)

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