Brazil Logistics Improve - 1

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By Alastair Stewart
DTN South America Correspondent

SAO PAULO, Brazil (DTN) -- For the past decade, Brazil's infrastructure has been stretched to breaking point by the rapid expansion of grain production.

Massive port delays and soaring costs have become a fixture.

But this year has been a bit different.

Brazil has blown away previous soybean export records, increasing shipments by a third.

"Performance has been excellent this year. We seem to have turned a corner," said Sergio Mendes, executive secretary at the Brazilian Cereal Exporters Association (ANEC).

Whereas in previous years exporters had been forced to switch shipments from Brazil because of the long loading delays, the opposite actually happened this year with cargos switched from Argentina.

SOUTHERN PORTS LEAD THE WAY

Brazil has bet on the creation of new export corridors through the Amazon region to northern ports as a way of clearing the infrastructure bottleneck, but if you look at this year's numbers, it is actually the traditional southern ports of Santos and Paranagua that have seen the biggest hike in shipments.

Brazil-wide soybean shipments jumped 36% in the first four months of the 2016-17 commercial year (February to May) to 30.4 million metric tons (mmt), according to government figures. In the same period, Santos saw shipments rise 68% to 10.8 mmt and Paranagua witnessed a 38% ramp to 5.0 mmt.

The improved performance of the southern ports is mainly due to increased efficiency, rather than expansion. Both Santos and Paranagua have instituted and fine-tuned their grain delivery systems, putting an end to the long lines of trucks waiting to unload.

The terminals at Santos invested heavily in maintenance and improving processes over the past year, while Paranagua swapped out four of its six shiploaders at the public terminals.

This all sounds miraculous. In truth, two external factors also helped dramatically. Firstly, the initial three months of the soybean season (February through April) were unusually dry in the south, which allowed vessels to load without interruptions. Secondly, the sharp downturn in the Brazilian economy meant soy cargos didn't have to compete for space at port and for trucks in the same way they did before.

NORTHERN ARC EXPANSION

Progress in creating export corridors from the Cerrado grain frontiers to Amazon River ports and to northern coastal ports has also increased capacity and eased pressure on infrastructure.

After decades of planning and discussion, these routes are actually starting to carry large volumes.

"We are seeing the consolidation of the Northern arc (of ports) as a major exporting region," said Daniel Furlan Amaral, economy manager at the Brazilian Oilseed Industry Association (Abiove).

Shipments through northern ports totaled 6.5 mmt in the February-to-May period, up 35% on the same period one year before.

Until 2013, exports through the north were limited to shipments from the Amazon ports of Itacoatiara and Santarem and a little from Itaqui in Maranhao state.

Now Brazil is beginning to see substantial barge traffic on the Tapajos River from Miritituba, expansion at Santarem port, the opening of operations at Vila do Conde and the expansion of the Tegram and Ponto de Madeira ports.

In total, export capacity through the northern ports has risen from 19 mmt in 2015 to 26 mmt in 2016.

These export routes are running far from perfectly.

Unbelievably, large parts of the BR163 highway that connects Mato Grosso to the key Amazon ports of Mirituba and Santarem remain unpaved and still turn into a quagmire during the Amazon rainy season.

With Brazil in the depths of an economic crisis, funds are not guaranteed to pave, or indeed maintain, the route.

Still, large volumes of soybean and corn are being sent via this route.

The transfer of 4 mmt in exports from southern routes through the north has eased the strain on the rest of the existing infrastructure.

"When you expand north, you get a lot fewer trucks going south," said ANEC's Mendes.

EXPORT PACE EASES IN JUNE

The line-ups of ships scheduled to load at Brazilian ports indicate the pace of shipments has eased in June, but monthly shipments should still approach record levels.

Only the fact that Brazil may not have produced as much soy as originally thought will impede it from breaking the export records set in 2015.

In mid-June, Abiove lowered its 2015-16 soybean crop view by 700,000 metric tons (mt) to 97.9 mmt, only marginally above the 97.0 mmt produced last year. As a result, it sees exports falling short of the 55.3 mmt shipped last year.

"The figures indicate that we could be moving towards a time when freight costs decline," said Edeon Vaz Ferreira, head of Movimento Pro-Logistica, a farmer-lobby group on logistics.

At the start of April, the cost to send a metric ton of soy from Sorriso, center-north Mato Grosso, to Paranagua was R$280 ($82.36), basically the same level as last year and breaking the recent trend for rising freight prices.

Lowering freight costs is vital since freight costs from Sorriso to Paranagua stand at nearly 50% of the corn price in the Mato Grosso city.

Alastair Stewart can be reached at astewartbrazil@gmail.com

(ES/SK)