Reuters / By Emily Kaiser / December 6, 1999
ST. LOUIS, Dec. 6 (Reuters) -- If Brazil upgraded its grain transportation infrastructure, it could easily overtake the United States as the world's biggest soybean producer, a U.S. Agriculture Department official said on Monday.
"In Brazil, there is a vast, undeveloped highland in the central part of the country that amounts to about 160 million acres," said Keith Klindworth, an economist with USDA's Agricultural Marketing Service who specializes in marketing and transportation issues. "160 million acres is greater than the 1998 soybean and corn acres that we planted in this country."
The highland, known as "Cerados", is home to some of the best farm land in the country. The Mato Grosso state alone -- dubbed the 'Iowa of the Tropics' for its ideal growing conditions -- could someday harvest as much as 74 million acres, Klindworth said.
But before any major expansion is feasible, Brazil, the world's second largest soybean producer, must reduce transportation costs, and that could take many years. The country relies primarily on trucks rather than rail or barge to transport crops as far as 1,400 miles to the eastern seaboard, where they are exported to Asia, Europe and other areas.
Trucking can cost up to $54 per metric ton, but improved rail service would reduce expenses considerably. In the United States, transporting grain to export markets costs about $19 by rail and $15 by river barge.
Because of the steep transportation costs, Brazilian grain dealers heavily discount prices paid to farmers far from the coastal ports. If the infrastructure were improved, transportation costs would drop, and prices paid to farmers would increase. Higher prices would likely spur more production.
If Brazil were able to significantly ramp up production, it would undoubtedly eat into export demand for U.S. soybeans. Already, the two countries compete for key export markets.
Klindworth said Brazil was increasingly using the Amazon River as an export channel, and estimated that it would ship about 1 million metric tons of soybeans by river next year. The rail system may get a boost from foreign investors who want to increase the supply of beans to crushing facilities along the coast.
"What has happened to make us fairly concerned (about increased competition for U.S. exports) is that there has been external interest and external financing of rail projects in Brazil," Klindworth said.
Klindworth said a much-publicized plan to form a major export route on the Parana River, which connects soybean growing regions in Parana and Argentina, to the coastal ports, was not much of a threat to U.S. exporters because it faces what may prove to be insurmountable environmental hurdles. He said the river runs through wetlands that form a wildlife habitat, and that would likely thwart dredging plans at least for the time being.
"We think (the Parana plan) is actually more promise than reality," he said. "We're not really worried about it until some of these environmental issues are resolved."
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