Port and transportation upgrades Farmers anticipate increasing market opportunities in Asia
Low prices won’t stop Brazilian farmers from expanding cropland by tens of millions of acres in coming years, says one of that nation’s analysts.
Not only are farmers in the interior state of Mato Grosso highly efficient operators committed to the long term, but massive infrastructure improvements will make them much more profitable in the future.
“A lot of pastureland is now being flipped to grain,” Pedro Dejneka told the Cereals North America conference Oct. 30.
“Even though they have lower prices right now, ‘I want to keep expanding my land’ (is their thinking). They know prices don’t stay low forever.”
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Brazil is stuck in stagflation, with poor government investing decisions of recent years stalling the economy. However, the long-term construction of port and transportation systems in the country’s north and east will radically boost the profit prospects of most farmers.
“The new way out,” is how Dejneka described the ports, roads and rails planned from Santarem on the Amazon River to a string of ports on the northeast coast.
The new ports will alleviate problems associated with the congested southern ports that now move more than two-thirds of Brazilian soybean exports. They will also improve the economics of shipping to Asia.
“A new way to China” is how Dejneka described the way Brazilian agriculture interests see the northern and eastern ports, with two to three days cut off the transport time from Mato Grosso to port and the same cut off the trip from port to China via the Panama Canal.
The savings for inland farmers should be huge.
Farmers in southern Brazil near existing ports can get their soybeans to China for less cost than farmers in Iowa, but Mato Grosso farmers pay far more than either, at about $160 per tonne versus less than $90.
Dejneka said the Mato Grosso price to China could be cheaper than either if northern ports become available.
Don’t expect these major developments soon. Dejneka said Brazilians are notorious for being late with grand plans, so the 2023 target for these improvements isn’t guaranteed.
However, he thinks the smart money is already investing as if the developments are certain.
“A lot of the major players … are already investing up there,” said Dejneka.
