Brazilian port push opens up big farm growth opportunities

20 Jul, 2016 02:00 AM
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Soybean production in Brazil's Mato Grosso state is set to expand drastically having already grown 40 per cent in the past five years to take advantage of improved port facilities providing better access to export markets. Photo by Alf Ribeiro/Shutterstock.com.
Soybean production in Brazil's Mato Grosso state is set to expand drastically having already grown 40 per cent in the past five years to take advantage of improved port facilities providing better access to export markets. Photo by Alf Ribeiro/Shutterstock.com.

As if being the world’s fifth largest country blessed with vast areas of rising farmland productivity and a third of earth’s fresh water isn’t enough - now Brazil’s agricultural export capacity is enjoying a port construction boom, too.

In fact, the long 8500-kilometre stretch of coastline capable of servicing farm exports and fertiliser imports could even see an oversupply of port infrastructure within a decade.

Soybean producers and exporters are the initial big winners, particularly as new port developments in northern Brazil will cut growers inland freight distances to the seaboard by 40 per cent and shave five days off shipping travel time to Europe.

The main grain production and export state, Mato Grosso in central/northern Brazil has already increased its cropping area 40pc to more than 9 million hectares in the past five years.

Two developing inland river ports capable of handling modern shipping in the northern export corridor state of Para (Barcarena and Santarem) handled more than 3m tonnes of soybeans last season.

Just a few years earlier they exported almost nothing.

Nationally, soybean exports have already grown by 120pc in a decade to more than 55m tonnes, but inadequate port capacity and poor inland roads had been major hindrances to further expansion, says an agribusiness report examining the implications of Brazil’s transport infrastructure drive.

Now major port developments are being mostly funded by private investment, including international agri-food commodity giants such as Cargill, Archer Daniels Midland and Bunge, which are among those paying for the Barcarena and Santarem upgrades.

Brazil already has more than 50 seaboard and inland river ports, but until 2013 they were mostly government managed, under funded and too shallow for grain shipping.

Private sector port investments, particularly in the so-called "Northern Arc", have since motivated more grain production which is likely to see soybean exports alone rise by 16m tonnes by 2025, according to research by Rabobank grains analyst in Brazil, Renato Rasmussen.

He said Brazil’s soy area was therefore expected to “increase drastically” in the coming years.

Its current 75m hectares of arable land area could spread into 10m hectares of underutilised pasture country in the next decade.

Longer-term cropping expansion could take Brazil’s arable area to more than 130m hectares as port efficiencies and competition slashed farm freight costs and eased fertiliser prices.

Other crops, particularly corn, were likely to benefit, too, and so would Brazil’s massive export beef capacity, said Australian-based analyst with Rabobank, Ben Larkin.

Agribusinesses investing in port infrastructure would want to make the most of any commodity export or import opportunity through their upgraded facilities.

Mr Larkin said Brazil’s port efficiency push highlighted the importance of discussions about lifting the capacity of Australia’s own ag supply chain network.

“What’s happening in South America is a good reminder to us that other countries are forging ahead,” he said.

While in the past Australian exporters had not been so threatened by Brazil as a global competitor because of its sub-standard port and transport infrastructure, political and economic instability and biosecurity issues like foot and mouth disease, now its growing influence on protein and stockfeed markets could not be ignored.

“Although Australia is not a direct competitor in soybean or corn markets, Brazil’s indirect impact on oilseed and feed grain demand will impact global buyer and pricing trends,” Mr Larkin said.

In the meat trade, China and Europe were already big and increasing consumers of Brazilian beef and Brazil was pushing hard for access to Australia’s much-valued US market.

“Brazil is an agricultural powerhouse with some of the world’s lowest production costs, and a very competitive currency, of late,” Mr Larkin said.

Brazilian farm inputs analyst, Victor Ikeda, noted that with the country favoured by a tropical climate, good rainfall and abundant freshwater reserves the likely conversion of 9m-plus hectares to productive cropland by 2025 would be a boon for the nation’s economy.

“This expansion represents outstanding opportunities not only for farm inputs companies but to the entire Brazilian agribusiness,” he said.

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FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Jock Munro
20/07/2016 5:54:18 AM

The usual suspects are involved in the Brazilian initiative ! Cargill ,ADM and Bunge. These are the same mega organisations that now have a stranglehold over our grains industry. Perhaps someone could explain how out future prospects could be enhanced by this scenario?
John Niven
21/07/2016 8:16:28 AM

Jock, they will NOT enhance Australian producers. How so called free marketers believe withholding their sand bucket of wheat can influence a market where there is no market because of multinational control is delusional. Sadly some others of us are our own worst enemies believing the goal posts will stay the same.
Consolidated
21/07/2016 2:43:58 PM

If you read past the first paragraph! '... new port developments in northern Brazil will cut growers inland freight distances to the seaboard by 40%' and that is every year
ATB
21/07/2016 3:21:29 PM

The iconic Australian Single Desk could have stopped this disgraceful attack on Australia's rite to sell Wheat at well over the world market. Turn it up fellas
Jock Munro
21/07/2016 4:51:55 PM

Too true John.

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