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Corn+Soybean Digest

Brazil Kicks Off 'Soybean Railway'

There's been a lot of water under the bridge in the 10 years since I interviewed a spokesman for the proposed rail line that was to halve production costs in the soybean expansion areas of Brazil.

A group of investors, led by the world's largest soybean farmer, Olacyr de Moraes, would connect the old, no-longer-used lines around the state of Sao Paulo with a new line shooting straight up toward the Amazon. This would replace slow-moving 18-wheelers plying narrow and often pocked roadways.

All that stood between the reality and the dream of laying tracks was the matter of a right-of-way and bridge over the Parana River. de Moraes was forced to wait for the government to build the bridge. Months of bureaucratic delays turned into years. Presidents and national currencies changed, new soybean varieties were developed to grow and thrive in the torrid conditions near the Amazon River, and de Moraes began selling off interests to keep his railroad alive.

Finally, last year, the 1.8-mile bridge over the Parana River was completed.

By last Aug. 6, when the first 75-mile stretch of railway was dedicated in a ceremony attended by Brazil's president, de Moraes controlled just 16.5% of a coalition of mostly U.S. investors in the soybean railroad.

With part of a U.S. $1.3 billion package of loans and bonds, the investors bought fifty 4,400-hp electric locomotives and 780 aluminum hopper cars to run on what will end up as a 500-mile rail corridor to Rondonopolis, projected for the year 2001. de Moraes is counting on U.S. $600 million to complete the project, from development funds and debentures.

A local newspaper reports that the southernmost 250 miles of the railway, called Ferronorte, will reach a 109-million-acre area. Farmers in the region will apply more lime and other yield-increasing inputs now that the railway will cut transportation costs. It's calculated that every 120-car train will carry as many bushels of soybeans out as 360 eighteen-wheelers, and at a savings of 40%.

Mato Grosso soybean farmer Moises Sachette and other growers living about 100 miles from the end of the first stage of the line aren't holding their breath, however, for a sudden production boom as a result of the line. Not this year, anyway.

"Sure we'll save a little on transportation," he says, "but we won't be planting more soybeans this year with Chicago prices so low." Transportation cost savings, he says, would have to be enormous to make up for such low prices.

Sachette says that, unless prices rebound soon, he'll reduce his normal 20,000-acre soybean planting by 10%. He adds that any transportation cost savings won't come overnight, anyway. Investors are going to want to recoup some of their $1-billion-plus investment before dropping prices.

"We're enthusiastic about the railway out here," he says, "because at the very least trucking lines will have to lower prices to compete with the railroad. There will be real economic benefit for producers. But any cost savings will be small and gradual."

Even so, for farmers in Brazil's soybean expansion area, the long-delayed Ferronorte could represent a bridge to profitability

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