Simplifying grain shipments in Brazil

A shipment of 65,000 tonnes of soya beans grown in the state of Mato Grosso which left from a recently completed terminal built by the Bunge trading company at the port of Vila do Conde, close to the mouth of the Amazon, has opened a new era for the shipment of Brazilian grains.

Until now, 80% of the soya and grains exported from Brazil, no matter where it was grown, has left from a handful of ports in the crowded south east of the country.

Bunge’s soya, destined for Spain, travelled by truck from farms in Mato Grosso, along the still only partly paved 2,500km BR-361 highway, to Bunge’s second new terminal at the riverside Port of Miritituba, 300km upstream from the Amazon port of Santarem.

The soya was loaded onto barge trains at Miritituba, each train able to carry 40,000 tonnes. The barges took the grain 1,000km down the Tapajos and Amazon rivers to the terminal at Vila do Conde, which can handle ships of up to 120,000 tonnes capacity.

Apart from Bunge, a dozen foreign and Brazilian trading companies are also building storage and loading facilities at Miritituba and at four deep water ports downstream.

Bunge expects that about 2mt (million tonnes) will leave by the Tapajos-Amazon route this year. But as new terminals start up and fleets of barges now being built come into service, up to 4mt will leave from Miritituba in 2015.

Paving the BR-163 should be complete by then, so up to 18mt of soya and maize are expected to use this route by the early 2020s, 30mt in the longer term.

Almost a third of the almost 90mt of soya beans now produced in Brazil each year, as well as about a quarter of the 75mt of maize, are grown in the state of Mato Grosso. But until now, 85% of the grain grown in the state has trundled 2,500km along poor maintained and increasingly congested roads, to Santos or Paranagua. If these ports are very congested and at peak times trucks can wait 60 hours to unload, vehicles drive a further 500–800km to Rio Grande or Sao Francisco do Sul.

It now costs about $150 to get a tonne of the grains grown in Mato Grosso to a port, twice as much as five years ago. Wages have doubled in Brazil in the past 10 years, fuel costs have increased, as have those of maintaining vehicles. The number of hours drivers can remain at the wheel has been restricted in an attempt to reduce the number of accidents, one of the world’s highest.

As well as queues of trucks, ships often have to wait up to a month at ports to load, resulting in a massive bill for demurrage.

Spending on improving Brazil’s infrastructure, or even maintaining what already exists, has been low on the list of government priorities for many years. But because the amount of grains produced each year has doubled from almost 100mt to close to 200mt in the past ten years, with the amount exported growing even faster, the logistics situation has become desperate.

In the past few years, only about 5mt of the 45mt of soya beans and meal exported from Brazil each year have left from ports in the north, even though close to half the total produced in the country is grown in the north or north east of the country.

Apart from the 3mt shipped from the port of Itaqui, in Maranhao state, most of it grown in the north east and taken to the port by road or rail, the rest travels by barge down the river Madeira. It is loaded into deep sea vessels either to the port of Itacoatiara, where the Brazilian Amaggi group has a terminal and crushing facilities, or on to Santarem, where Cargill has had a terminal for several years.

Once the new facilities on the Tapajos and Amazon are working properly, it should cost a third less to ship soya and grains from the ports in the north than it does via Santos and Paranagua.

A round trip from ports in the north to ports in Europe or Asia will take up to five days less than one starting at ports in the south, which means further cost savings.

Only two regions of Brazil will be able to grow significantly more soya and maize than is now possible, as all the land in the south and south east is fully occupied.

One is the centre west, with Mato Grosso in the lead, as well as Mato Grosso do Sul and Goias, the other is comprised of four states in the north east, Piaui, Maranhao,Tocantins and Bahia, known as ‘Mapitoba’ for short. About 10mt of soya is now grown in this area, as well as 5mt of maize.

Until now, China has not bought maize from Brazil, although it is by far the leading destination for soya beans, with 32mt of the 43mt shipped last year going there.

The average Chinese now eats about 60kg of pork, chicken and beef each year. But according to USDA estimates, the per capita consumption of meat in China, will have risen to 90kg by the early 2020s.

China now buys most of the maize it imports from the United States. But with capacity to increase output there restricted, Brazil will almost certainly become a leading supplier of the grain to China in future.

Although the new route from Miritituba to four deep water ports is attracting a great deal of attention and investment at the moment, there are plans to make several of the other large rivers which traverse areas where grains are grown, navigable to barges in the next few years.

The government plans to build no fewer than 50 new hydroelectric power stations on the upper reaches of the Tapajos itself, or along its numerous tributaries.

Until now, locks have rarely been incorporated alongside the dams which contain turbines. In one case, on the Turucui, such locks were only built 30 years after the power station started up. This was because of a dispute as to whether the company building the power station, or the ministry of transport should pay for the locks.

Two new dams without locks are virtually complete just above the city of Porto Velho, now the limit of navigation on the Madeira, along which about 2mt of grains are now taken by barge to deep water ports each year. This river could carry twice as much as it does now, if some dredging were done and buoys which would allow barge trains to travel for 24 hours, rather than just during daylight, were installed.

Dredging is also planned for the river Paraguay, to allow barges to travel down to ports on the Parana river in Argentina. Up to 4mt of the grain grown in Rondonia and western Mato Grosso states could use this route.

If a new era is opening up for waterways, which is by far the lowest cost mode for carrying bulk cargoes, numerous projects which will allow much more to be taken to ports by rail, are now under way.

Plans to remove restrictions which now limit the tonnage able to use the two lines running to Santos, one operated by the Latin American Logistics, ALL company, a narrow, metre gauge line, the other a broad gauge line operated by MRS, are gradually making progress.

ALL is duplicating its tracks, which involves building several new tunnels, while the project has also run into trouble because it passes through several small Indian settlements on the way, which means authorization from the environmental authorities is needed.

Indians are a source of difficulty along several rivers in the Amazon area as well, as backed by several vociferous NGOs, they have managed to block projects.

The generally authoritarian behaviour adopted by governments in recent years have failed to persuade the Indians to give way. But the proposal that the Indians should be given a share of the profits arising from the new power stations and waterways, rather than bullying them, may prove a solution to the problem.

MRS’s line to Santos, which serves Mato Grosso do Sul, Goias

and Minas Gerais, passes through the centre of Sao Paulo city, where it shares tracks with commuter services. This means freight trains can now only use the line in the early hours of the morning.

A debate has raged for many years as to whether MRS should build a line skirting the city, or whether a tunnel should be built under the city centre. Whether a by-pass should run to the north or the south of the city has also been an issue. It now seems likely that tracks following the path of a new orbital road to the south of Sao Paulo, will be laid.

Delays of this kind have dogged the building of new railways, or extending existing ones in Brazil for decades.

In the mid-1980s, work started on building the daddy of them all, the 2,500km ‘north–south line’ which will eventually run from a point on the line which carries Vale ore from its Carajas mines to the port of Itaqui, south to Sao Paulo state. This line passes through, or close to, millions of hectares of land where grains are grown.

So far, only about 500km of this line is open to traffic, largely because the finance needed to complete it keeps drying up, as well as general inefficiency and corruption.

Until now, there has been little co-ordination between competing projects of this type.

Politicians anxious to make an impact for electoral reasons have frequently launched ambitious projects, and two new railways are planned to run up to 2,000km west from an Atlantic port to a point on the part-completed north-south line.

These two projects are already bogged down, just a few years after being started, and will take at least six more years to complete.

It has now become clear that the state bodies responsible for executing such projects, have found it impossible to complete them. This has obliged a reluctant government to resort to auctioning concessions whereby private companies will undertake to build or expand projects and receive tolls, or to receive subsidies from the government to do so.

As part of an expansion plan for railways, which envisages about 10,000km of track to be built from scratch, or upgraded in the next few years, two new lengths of track to stretch north west into the soya and maize producing areas are planned.

The association of oilseed crushers, Abiove, is also pressing for a new line which would run parallel to the BR-163 highway, terminating at Miritituba or Santarem to be built.

The government also plans to auction the concession to build and operate a new 480km stretch of line to run from the point where the North South line now starts, on the Carajas railway, north to the port of Vila do Conde.

Daniel Amaral, chief economist with Abiove, worries that a major problem in Brazil has been the absence of a system of priorities, whereby a small number of selected key projects are begun and completed. At the moment, numerous competing projects are started almost simultaneously, usually for electoral reasons. But partly because there is a chronic shortage of trained engineers and managers to build and run them, none get completed on schedule, or at all.

In the past few years, the revenues the export of steadily increasing amount of grains, as well as other bulk commodities such as minerals, have become increasingly essential to Brazil’s financial well-being.

For this reason, sufficient funds for investment may be forthcoming at last and logistics will again become the priority they last were in the 1970s, when the country’s present network of paved roads and a handful of railways were built.