By Greg Vincent
Get full coverage of the Top Producer Frontier Study Tour.
Transportation of agricultural products in Brazil has been a challenge to say the least and it is the number one factor limiting agricultural growth. That's changing rapidly, though, and the country is putting its full weight behind its infrastructure development.
In March, a group of 16 farmers and journalists on the Top Producer Frontier Study Tour traveled throughout Brazil to get a handle on how quickly this infrastructure is being developed and to learn what that may mean to U.S. producers.
"The roads are a little bit better. We have a state tax that soybean farmers pay and we have an agreement with the government that this tax will build new roads. We have lots of new roads now that go east and west. The old roads went north and south,” says Ricardo Silva, the associate director of Aprosoja, the Mato Grosso soybean growers association.
"The railroads are still a long way away from the soybean fields. But hopefully it's going to be closer year after year.”
Transportations costs typically take up about 30-35% of the price received by farmers in Mato Grosso. As more roads, waterways and railroads are developed, this cost will drop significantly.
Soccer is one of the driving forces behind that. The World Cup Soccer Tournament could drive some of this development. Brazil is hosting the meet in 2014 and a major push to finish a key rail system by 2014 was announced in March, says Marcelo Montiero, the executive director Aprosoja.
"There's this east/west railroad is going to be built. They're planning in the next four years to have a railroad connecting the center of Mato Grosso to the port in the east coast of the country,” Montiero says.
"It will have a big impact. We have railroads flowing south, but they charge a lot. They normally charge truck prices because they are the only one's available.”
While the government and farmers are pushing hard for these changes, the progress has been slow in some areas. This leaves the ultimate success…and its impact on the worldwide markets in question for some of the U.S. producers like United Soybean Board Director and South Dakota farmer Bob Metz who participated in the trip.
"Yes, the state roads are getting better. The rural roads are still very tough. I've heard about the railroad being built since 1999. To be honest I've traveled in Brazil seven times and I've crossed one set of railroad tracks in these seven times. There's a lot of talk about the modernization of this railroad, but I'll have to see it to believe it,” Metz says.
Much of the emphasis has been on developing state highway systems. Railroads and waterways leading to key ports on the Amazon River have lagged and that is at the expense of Brazilian producers. Montiero says just the development of the Toncantins waterway that flows from the center of Brazil to the Amazon River could mean a savings of $30-$40 per ton of soybeans transported. However, to make that a reality, there are still four more locks that must be completed on the river.
If and when these projects are completed, you can expect another push of production expansion in Brazil.