In Brazil, a record soya crop will allow 55mt (million tonnes) of beans, meal and oil to be exported this year. A total of 28mt of the beans will go to China.
It is anticipated that 83–85mt of soya beans will be harvested in Brazil this year, 20mt more than in 2012.
About 55mt of soya products will be exported, 6mt more than the previous record of 2011.
This will be the first time ever more than 80mt of soya has been harvested in Brazil and only the second time more than 70mt has been produced.
Spurred by the high prices and strong demand which followed news of the severe drought in the United States last year, farmers planted 9% more land to soya last year than in 2011, an extra 2.3 million hectares.
China is expected to buy 28mt of the beans, about 75% of the total. As in past years, most of the meal will go to countries in Europe, notably the Netherlands.
China may also be the leading market for the 2.7mt of soya oil to be shipped 2012/13.
An all time record 20.5mt of maize was shipped last year, almost twice as much as ever before, with high prices and strong demand for the grain was also spurred by the US drought.
Perhaps surprisingly, many farmers gave priority to soya rather than maize as a summer crop for 2012/13. This is because the oilseed is easier to grow and to sell than maize.
About 3.3mt less maize will be harvested this year than the record 72.3mt of 2012. The increasingly important winter crop, however, planted in the states of the centre west, as well as Parana immediately the early soya has been harvested, will be a repeat of last year’s.
Maize is shipped from June onwards, after most of the soya has left and pressure at the ports has subsided. Although maize still has to compete with sugar, the export of which peaks in September and October.
CHINA CALLS THE SHOTS
Back in 2002, only 4mt of Brazil’s soya beans went to China, taking 45 days to travel the 11,000km which separate the Port of Santos from Shanghai.
But 28mt of the 35mt of beans to be shipped this year will go to China and about half the beans imported by China will be Brazilian.
Because transport facilities in Brazil are so poor, it costs about $75 more to get each tonne of beans from there to China than it does to get a tonne of the beans grown in the state of Iowa to Shanghai.
Beans grown in the US leave from Gulf ports and travel via the Panama canal.
Even though the Chinese economy is not expected to grow at the two digit levels of the past decade from now on, several million inhabitants continue to migrate from the countrywide to
cities each year. They eat more and better
than they did in the countryside, notably more meat such as pork and chickens. Animals are fed mainly on soya meal and maize, so more grains will have to be imported by China each year from now on to keep pace with growing demand.
With the cost of transport rising steadily in Brazil, as wages rise and congestion increases, farmers in Brazil receive much less of the export price than do farmers in the United States.
Along with neighbour Argentina, Brazil is one of the few countries with the potential to produce much more soya and maize — that is, as long as the price is high enough to encourage farmers to plant.
About half of the soya beans shipped to China are grown in the south and south east of Brazil, on farms about 500–600km from the sea. The
proximity of this region to ports means it costs about US $80 to get a tonne of the grains grown in the south to nearby Paranagua or Rio Grande.
But there is little spare land in the south of Brazil and most of extra comes from three states in the centre west, Mato Grosso, Mato Grosso do Sul and Goias, as well as from four states in the north east, far further from the sea.
It costs about $125 to carry each tonne of soya or maize the 2,500km from Mato Grosso to Santos and Paranagua, the ports most favoured by Chinese importers.
It takes two or three days less to get soya from ports such as Itaqui, or Ilheus in Brazil’s north east, as well as from ports on the Amazon river, such as Itacoatiara and Santarem to China than from Santos. But the high tolls levied to on ships using the Parana Canal means the longer route from the ports in the south, via the Cape of Good Hope, is more attractive to the Chinese.
With farm commodities such as soya, maize, sugar, meats, coffee and cotton responsible for a steadily growing share of Brazils earnings from export, the government has launched an ambitious plan for improving logistics in the next ten years.
At the moment, 65% of all the goods moved in Brazil travel along increasingly congested and often poorly maintained roads.
The new plan envisages the share of goods going by road falling to about 30% by the mid 2020s.
By then, the share of goods carried by rail is planned to have risen from 25% to 35%, while that moved along waterway, the lowest cost mode of all, but handicapped by the fact that few rivers are navigable in Brazil as yet, is scheduled to increase from 13% of the total to 29%. 62 new locks are planned, mainly for rivers in Amazonia.
About $20 billions is also to be spent on upgrading ports, where trucks can now wait up to a week to unload. Ships loading soya, maize and sugar may have to queue for much longer than that for a berth, incurring high demurrage charges in the process.
Included in the plans are new routes which will allow the bloc trains of hopper wagons, able to carry soya, maize or sugar, which have been bought by the trading companies in the past few years to get grains to the ports faster, as well as to load and unload them much more rapidly than has been possible until now.
Most trains on their way to Santos now have to pass through the centre of Brazil’s largest city, Sao Paulo, in the dead of night, when commuter services cease running. However, according to the plan, two new rail links will avoid the city altogether.
The north-south railway, which links with Vale’s Carajas line, which terminates at the deep water port of Itaqui and run through half a dozen leading soya producing states to terminate west of Sao Paulo city on the way, is be completed next year.
Two brand new east-west lines to link the north-south railway, with Atlantic ports in the states of Pernambuco, Bahia, and Ceara, are also scheduled for completion by 2015 or so.
Unfortunately, precedents for the completion on time and on budget of infrastructure projects are not encouraging.
Building the north-south railway began 25 years ago, but even now, only about 20% of the planned track is open to traffic.
Some faulty track has had to be re-laid at high cost. Cost over runs are a major problem, and some infrastructure
projects have ended up costing up to seven times as much as was originally budgeted, as well as taking at least three times as long to build as anticipated.
Largely because of bureaucratic difficulties and the lack of trained personnel able to supervise projects efficiently, less than 20% of the funds allocated to infrastructure projects each year has been actually spent in the past.
The shortage of trained and experienced manpower, as well as competent managers, is probably the greatest obstacle to the new projects coming to fruition as planned.
The need for a better transport system is becoming increasingly urgent, however, as the supply of many crucial commodities continues to increase far faster than the ability to get them on board ships.
Earnings from the exports by the farm sector, as well as of minerals, have prevented Brazil’s trade balance from being negative in the past few years.
Because of the surge in costs, notably of wages, which have risen by 80% in the past 10 years, Brazil is no longer a competitive exporter of manufactured goods such as vehicles, footwear and machinery.
The unprecedented increase in production of grains this year shows that Brazil has the potential to grow much more of the food the world badly needs.
But for this to happen, the grains have to be got on board ships at a reasonable cost.