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Corn+Soybean Digest

The Transport Advantage

For years, freight was one of the main factors keeping U.S. farmers competitive with their South American counterparts, whose fixed costs were often far lower. The Missouri and the Mississippi Rivers, among others, flow out nicely to the ocean from the production areas. Meanwhile it takes days to get to the ocean or to tributaries of the mighty Amazon.

But that transportation advantage may be slipping away. Ten years ago it was estimated that 90% of all inter-city transport in Brazil was done by 18-wheeler, upping the costs of inputs in and outputs out. The near-exclusive use of tractor trailers over long distances of narrow and pocked roads made it far more expensive, per mile, to transport goods in this vast country. By the year 2000, according to one official study, trucks accounted for only 60% of long-distance transport, and rail was up to 21%.

BUT THE TREND may be getting a boost from President Lula's 2007 Accelerated Growth Program (PAC, by its initials in Portuguese), whose aim is to boost the economy with big infrastructure spending. That same year, the Brazilian government announced its National Logistics and Transport Plan (PLNT,) which coordinates public and private infrastructure investment through 2023.

“There is still a lot to do in order to change the grain transportation situation,” says José Augusto Valente, a Brazilian logistics and transport consultant who was National Transport Policy Secretary when the PLNT was written. “That's because grain is the kind of cargo that…should be shipped by waterway and/or railways. Grain transport on highways should be the exception and not the rule as it's been for (the past) 10 years, and still is today.”

Even so, Valente says, the highways are better than they were 10 years ago. The advances, he says, haven't been so much in more paved miles, but in improving what's there: turning two-laners into four-lane highways and improving things like signage. The improvements, Valente explains, have come about largely through the release of about $900,000/year in fuel tax revenues to the states.

EVEN SO, THE main aim of the PNLT is to decrease the burden on the highway portion of Brazil's transportation infrastructure, and send more goods via rail and waterway. And the big-spending PAC investment program aims to help Brazil get there by expanding several railway networks, including the darling of them all, the North-South Railway, projected to eventually link the Atlantic Ocean port of Itaqui in the north, with the port of Santos, near São Paulo, in the south.

The government owns the rail lines but sells 30-year leases to operate sections of them: so far, money earned through the leases has been applied, as Valente says “more locomotives and cars… elimination of bottlenecks, (and) through city bypasses.”

Improvements in the Brazilian railway system to date, says Valente, are due to investments made by the companies operating the lines on long-term leases, and on “long-term contracts between grain shippers and operators.”

Maybe one good factor to come from the current recession will be improvement in U.S. grain infrastructure through a spending program. Let's hope so, because Brazil started theirs a while ago, and is hard at work on highways and railways, like the North-South.

James Thompson is a writer and marketing consultant based in Uberaba, Brazil, a center of soybean, corn, cattle and sugarcane production. You can contact him at [email protected].

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