South America Calling

Poor Roads Raise Brazilian Grain Costs By 30%, Claims Survey

The poor state of Brazil's roads increase grain transport costs by R$3.8 billion ($1.2 billion) each year, which accounts for 30% of total costs, according to research released by the Brazilian Transport Confederation (CNT).

Eighty-six percent of losses are concentrated in the shipment of soybeans and corn.

Costs are so high because grain trucks have to travel 1,000 miles or more from many Center-West producing regions to southern and southeastern ports.

These losses, which seem extremely high, are due to the need to use extra fuel, the accelerated wear on trucks and the high percentage of accidents.

According to a survey of grain transporters, some 85.8% said bad roads were a grave or very grave problem.

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CNT found 63.4% of grain-carrying roads to have deficiencies in paving, signaling or in construction.

The survey looked at grain transport in four main producing regions: the Center-West (including Mato Grosso and Goias states), Parana state, Rio Grande do Sul state and the northeast.

In truth, it would be preferable to reduce dependence on road travel. In Brazil, approximately, two-thirds of soybeans are transported by road compared with just 20% in the U.S.

Most interviewed (83%) said the limited availability of rail transport was a grave or very grave problem. Brazil has 3.4 kilometers (km) for each 1,000 square kilometers of territory compared with 22.9 km in the U.S.

Even better would be the development of Brazil's vast river network for grain transport, CNT noted. If the substantial environmental and structural obstacles were cleared, farmers could see substantial cost savings, said CNT.

For example, development of the Teles Pires-Tapajos river system, which links northern Mato Grosso to Amazon ports including Santarem could cut soy and corn transport costs by half, CNT estimates.

Low efficiency of port equipment was a grave or very grave problem for 100% of users, while insufficient drafts were a grave or very grave problem for 80%, said the survey. Brazil's ports are ranked 122nd in the World Economic Forum's competiveness ranking, while the U.S. is ranked 12th.

"Transport projects need to be implemented with a systematic vision, integrating railroads, ports, rivers, roads and terminals," said Clesio Andrade, CNT president.

Brazil has been working to improve its grain logistics in recent years, most notably through the northern export corridors from the Cerrado grains fields to Amazon ports. But the survey is a reminder of how much there is to be done.

In order to make up for its grain logistics deficiencies, Brazil would have to invest R$195 billion ($62 billion), estimated CNT. In 2014, only R$15.8 billion ($5.1 billion) was invested.

(CZ)

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