Agricultural Economics Department
Date of this Version
11-20-2019
Citation
agecon.unl.edu/cornhuskereconomics
Abstract
In previous articles in this space (on 6/20/2018 and 6/19/2019), I talked about recent developments and challenges for Brazilian grain markets. We discussed that one of the main obstacles for Brazilian competitiveness is the country’s logistics system. In those articles, we focused more on transportation and how higher marketing costs are explained by the poor infrastructure in Brazil and the modes of transportation used to haul grain to export ports. Today we will talk a bit more about this point, and then address another dimension of the logistics challenge in Brazil.
As previously discussed, the major agricultural area in Brazil is the center-west region, while the new frontier that has been expanding in recent years is the Matopiba region in the Brazilian northeast (Figure 1). One of the greatest challenges in these areas is transportation. Traditionally, Brazilian grain is exported through ports in the south and southeast, which are located around 1,000 miles from those regions. Still, approximately 75-80% of Brazilian grain is exported through these ports in the south and southeast. In addition, grain from the center-west and Matopiba is mainly transported by trucks, which is typically more expensive than rail or barges.
The distance to the ports and the relatively more expensive mode of transportation has decreased the competitiveness of Brazilian grain in the world market. In order to improve competitiveness, Brazil has been working on expanding the capacity of ports located in the north and developing cheaper and more efficient modes of transportation (i.e. rail and barges) to haul grain to the northern ports. Nowadays, around 20-25% of Brazilian grain is shipped through the northern ports. The Brazilian government plans to expand this number to 40% by 2025. Transportation costs could be reduced since these ports in the north are geographically closer to the center-west and Matopiba. Besides, they would be accessed more easily by cheaper modes of transportation (rail and barges).