Since 2006-07, Brazil has more than doubled its output of soybeans, going from harvesting 59 million tonnes to an estimated 119.5 million tonnes in 2017-18, and now is running neck and neck with the United States for the world’s No. 1 position in soybean production.
During that same time, Brazil has tripled its soybean export total, rising to 75.5 million tonnes in 2017-18 from 23.4 million tonnes in 2006-07, making it far and away the world’s largest exporter of soybeans, leading the second-place United States in that category by 18 million tonnes.
Most analysts believe this trend is only going to accelerate in the coming years. For instance, Rabobank said it expects Brazil’s soybean exports to increase by 40% by 2026.
While Brazil’s meteoric rise in soybeans has benefited the South American country, as well as major importers like China, it has strained its transportation system, which has struggled to efficiently move the bumper crops.
A report released earlier this year from Rabobank, authored by Grains & Oilseeds analyst Victor Ikeda entitled, “Brazilian Grains and Oilseeds Barging In – Waterway Transport on the Rise,” documents the changes that have taken place in recent years, particularly in northern Brazil, where shipments through ports have increased significantly over the last seven years.
“Brazil recently saw several investments in port capacity, with the expectation that these would boost Brazilian export capabilities,” Rabobank said. “As a matter of fact, soybean and corn exports through the so-called Northern Arc port area — where new terminals, such as the port of Barcaerena/Villa do Conde, became operational the past few years — reached 26.3 million tonnes in 2017, up 350% from 5.9 million tonnes in 2010.
Rabobank said it expects exports via the Northern Arc to increase by at least 130% over the next decade.
While the southern port of Brazil (Santos, Rio Grande, and Paranagua) exports the largest quantities of agricultural products, the backlog, long distances, and increasing transportation costs of these ports have created a demand for more options for exporters, according to a recent Global Agricultural Information Network report from the U.S. Department of Agriculture.
Southern ports experienced a 110% increase in exports, from 33.8 million tonnes to 71 million tonnes during that seven-year period, mainly made possible by improvements of existing infrastructure, rather than large-scale greenfield projects, Rabobank said.
As a result of the dynamics of the grain transportation situation in Brazil, driven by changing flows, Northern Arc ports have almost doubled their share of soybean and corn exports, to 27% in 2017 from 15% in 2010, Rabobank noted.
The main mode of transportation for grains in the Northern Arc is by water, so with the intensified use of ports in this area, the volumes transported over waterways are expected to continue to increase, Rabobank said.
The upgrades haven’t been limited to the export ports, as other modes of grain transportation also have seen major investment, the report said. The Ministry of Transport, Ports and Civil Aviation said that between 2010 and 2016 nearly 80 billion real ($19.5 billion) was invested in highways and roads, 49 billion real ($11.9 billion) in railways and 16 billion real ($3.9 billion) in waterways, comprised of both public and private investments.
“Although it is not possible to identify exactly how much of those investments were focused on supporting the new grain logistics routes, part of these investments obviously benefited agribusiness,” Rabobank said.
Rabobank said the combination of more grains going to northern ports and increasing investments in logistics has resulted in an interesting change in the grain transportation network that has to be crossed to reach Brazil’s port.
“Rabobank estimates that 44% of soybeans and corn arrive in the ports via road transport, which isn’t different from the 2010 situation, while obviously volumes grew, by 145% to 42.8 million tonnes,” it said. “The volumes arriving at ports by train doubled from 19 million tonnes to 40.4 million tonnes, but the share of railway transport decreased, from 50% to 42%.”
The main change, according to Rabobank, occurred on the waterways. In 2010, 2.2 million tonnes of soybeans and corn arrived in export ports via rivers. In 2017, this volume increased to 14 million tonnes. Consequently, the share of waterways in the transportation network increased to 14% from 6%.
“Almost all the barge shipments to export ports occur in the Northern Arc, where nowadays half of all exported volumes arrive at the export ports via waterways,” Rabobank said.
Rabobank said it expects railways to recover shares again in the long term and waters to continue to gain share in the Brazilian grain transportation network.
“For railways, Brazil is expected to tender for the concession of new lines in the near term,” Rabobank said. “This is most likely to happen for the new line of the North-South railway in the central area of Brazil and Ferrogão, which will link the northern area of Mato Grosso (the main soybean and corn-producing state of Brazil) to a waterway in the state of Pará.”
The report noted that the government is also in talks with rail companies to extend the concession of current contracts, which are due to end between 2028 and 2034, by another 10 to 15 years in return for new investments in these railways.
Trucking issues plaguing Brazil’s grain industry
Despite the billions of dollars spent to upgrade Brazil’s grain transportation infrastructure, the country still is far from efficient at moving grain and is still very dependent upon trucking to get the job done.
That was never more apparent than during an 11-day trucker’s strike in late May that caused estimated losses of $1.75 billion to Brazil’s agricultural sector.
Although soybean exports were not significantly affected since the harvest was nearly finished when the strike began and the harvest for the second crop “safrinha” corn was just beginning, the greater impact has come with a new law that allows the National Transport Agency (ANTT) to set minimum rates for trucking freights across the country.
The ANTT in September raised minimum truck freight rates by 5% on average, which translates into a more than $800 million increase in transportation fees for the country’s grain industry, according to Anec, an exporter group based in Brazil.
Meanwhile, the Brazilian truckers’ association (Abcam) said that the new higher minimums did not do enough to meet the needs of freelance truckers. Abcam said it has no plans to go on strike again but would seek a meeting with the office of the president’s chief of staff to voice its concern.
Brazilian roads account for approximately 60% of all grains and oilseeds cargo transportation, according to a 2018 Global Agricultural Information Network (GAIN) report from the U.S. Department of Agriculture. The report notes that many of the country’s main grain transport roads are unpaved.