Making the future happen

by Teresa Acklin
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State-of-the-art intermodal grain shipping arrives in Mexico.

   By Fernando Valdez, director of Ferropuerto Laguna, Torreon, Mexico

   In the middle of the desert, the two-lane country road suddenly connects to a new four-lane private highway. Some 730 meters distant, a large grain facility appears like a mirage. Eight gleaming grain bins surround the twin elevators. A rail spur leading to a siding glints in the sun. Trucks of all makes, models and sizes swarm around the six loading hoppers.

   Welcome to Ferropuerto Laguna, a year-old grain handling facility near Torreon, Mexico. With a rail unloading capacity of 1,000 tonnes per hour and a storage capacity of 64,000 tonnes, Ferropuerto Laguna is one of the most modern facilities in North America.

   Grain arriving at the facility by rail is distributed regionally by truck. Trucks can be loaded at a rate of up to 540 tonnes per hour from six 90-tonne hoppers.

   Torreon, a city of 900,000 in the north-central part of Mexico, was founded barely a century ago when it was selected as the main crossing for two critical rail routes: Mexico City-El Paso, Texas, U.S.; and Durango, Mexico-Brownsville, Texas, U.S.

   Agriculture in the area depends totally on irrigation, as mean annual rainfall is only about 30 cm. Cotton dominated the area's agricultural economy until 1955, when alfalfa production and dairy-related agriculture began to take hold.

   At the same time, poultry and beef production expanded, and mills designed for processing cottonseed were either converted to grind soybeans and other oilseeds or were abandoned. Today, Torreon's broilers, eggs and choice steaks — as well as its dairy products — are marketed as far away as Acapulco and Cancun.

   As the region's dairy, beef and poultry industries expanded, demand for grain and oilseeds outpaced regional production. Torreon currently imports more than 1.5 million tonnes of grains and oilseeds annually from other parts of Mexico and the U.S.


   Since 1988, public policy in Mexico not only has emphasized free trade, but also a greater role in infrastructure for private interests. A group of Torreon entrepreneurs, expecting continued growth in foreign trade and in grain and oilseed imports, formed a company to take advantage of new opportunities in the private sector.

   That is how Ferropuertos was born. The word, whose English equivalent is “railports,” was coined to emphasize the link between different transportation modes. The word designates intermodal facilities and was selected as the new company's name and registered trademark.

   A ferropuerto is a facility where rail and truck can interact, whether unloading grain from hopper cars and loading it into trucks, or transferring containers to or from flatcars. The facility is complemented by customs' offices to expedite foreign trade, and all services necessary for trade and transportation are available, including trucking services.

   The group selected a 100-ha site near Torreon as the first grain installation because of the area's supply and demand fundamentals. Named Ferropuerto Laguna, the facility began operations in July 1992.


   Ferropuerto Laguna currently is the only grain facility in Mexico that can receive 90-car unit trains without switching and that can unload the trains in eight hours.

   Grain operations so far have consisted of incoming shipments of Mexican maize and soybeans, as well as imports of U.S. soybeans, sorghum, cracked maize and wheat middling pellets. U.S. products have originated at points in the Kansas City metropolitan area, which extends into both Missouri and Kansas, and at West Texas points.

   Nearly all U.S. rail service has been provided by the Atchison, Topeka and Santa Fe Railway Co., with most traffic entering Mexico through El Paso, Texas. Rail service within Mexico is provided by Ferrocarriles Nacionales Mexico (FNM), the state railroad.

   The Ferropuerto Laguna grain facility operates solely as a service company in that it does not buy or sell grain. The decision to import U.S. grain or buy Mexican grain is made either by the end user or by grain trading companies. Continental Grain Co. has leased a silo at Ferropuerto Laguna and distributes its grain from the facility.

   U.S. grain arriving at the facility typically is priced by exporters on a mid-bridge basis, with importers responsible for border crossing, importing expenses and freight to final destination. (Mid-bridge means the selling price includes freight from the U.S. origin point to the border with Mexico, where title then transfers to the buyer.) The mid-bridge price generally has been financed in U.S. dollar-denominted credits at low interest rates, and the Mexican expenses are financed in pesos at much higher interest rates. But Continental Grain sells U.S. grain through the facility at an all-inclusive final-destination price, with an option to finance the entire transaction in low-interest, U.S.-dollar-denominated credits.

   Because the facility can handle unit trains without switching, special rates have been negotiated with FNM, U.S. freight forwarders and Mexican customs brokers. The lower rates, along with operational efficiencies, mean Ferropuerto Laguna's grain unloading/loading charges are about 25% less than prevailing market charges. The facility's storage also is priced competitively, as are its trucking services.

   Even though Ferropuerto Laguna is privately owned, Mexican regulations require the facility to operate as a public facility in that it cannot show any preference or discrimination toward its customers or trucking companies.


   Construction of a second grain ferropuerto currently is under way at Celaya, northwest of Mexico City. Called Ferropuerto Bajio, the facility will have a storage capacity of 45,000 tonnes and an unloading capacity of 500 tonnes per hour. Three other potential sites are under study.

   As personal income in Mexico increases, consumption of dairy products, eggs, poultry and meats are affected, requiring growing volumes of sorghum, oilseeds and oilseed meals.

   When the North American Free Trade Agreement takes effect, duties on sorghum and rice imports immediately will be abolished, while duties on other grains and oilseeds will be eliminated over a 10- to 15-year period. Thus, NAFTA will open a fast-growing market for U.S. and Canadian grains and oilseeds.

   At the same time, NAFTA will open the Mexican market to duty-free imports of meat and poultry. These imports will put competitive pressure on Mexican producers to reduce costs, including the costs of imported feed grains, to keep their market share.

   Because of expected grain-import growth, increasing competitive pressures and the fact that most of the population is located on inland plateaus, full use of existing national rail capacity will be critical in the future. Accordingly, the need for additional, strategically located facilities will increase.

Torreon project reflects changes, opportunities for investors, suppliers

   The Ferropuerto Laguna project developed by the private sector at Torreon, Mexico, reflects changing worldwide attitudes toward grain trade and marketing, according to a representative of Grain Systems, Inc., Assumption, Illinois, U.S., the principal supplier for the project.

   Governments are allowing the private sector to play a greater role in grain trading, said Larry Prager, G.S.I. sales manager. As a result, opportunities will increase for investors and suppliers to participate in such projects worldwide, Mr. Prager said.

   At an early stage, G.S.I. provided technical assistance and feasibility information to the organizing investors. The completed project reflects the results that can be achieved when prospective customers and suppliers get together to work jointly from a project's inception, Mr. Prager said.

   The cooperation between Ferropuertos management and G.S.I. enabled the project to progress from the idea stage to the feasibility study stage to execution in record time, he said. And the aggressive completion schedule was met at a record-low cost for a truck and rail grain receiving facility of that size.

   Mr. Prager attributed the time and cost savings to the design-and-build concept informally agreed to by Ferropuertos management and G.S.I.

   Mr. Prager said Ferropuertos Laguna was one example of the blend of concept and technology that would enable Mexico to compete effectively in the world economy and to take advantage of increased trade expected from the North American Free Trade Agreement.