Northern port access to reduce costs | Project could see 40 million acres of pastureland converted to soybean production
CALGARY — The completion of a major highway project in Brazil will pave the way for an additional 40 million acres of soybean production in just one state, says a big producer of the crop.
Guilherme Scheffer, partner in Group Scheffer, a 230,000 acre farm located near Cuiaba in the state of Mato Grosso, said the road project will drastically reduce the cost of getting soybeans to export position.
The state produces 20 million acres of soybeans a year, or 30 percent of Brazil’s total production of the oilseed.
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The vast majority of soybeans produced in Mato Grosso are exported from ports in southern Brazil. The 2,000 kilometre journey to the ports costs farmers an average of $150 per tonne.
Work is underway on highway BR-163, a 4,500 km road that connects Mato Grosso to Santarem, a port on the Amazon River. The revamped road will provide growers with vastly improved access to ports in northern Brazil.
The transportation bill for Mato Grosso’s soybean farmers is expected to be reduced by $50 per tonne once paving of the highway is complete and bridges have been built or repaired.
“That is substantial,” Scheffer said during an interview following a presentation at the Agricultural Biotechnology International Conference 2013.
Farms in the state produce four tonnes of soybeans per acre, so the total savings would amount to $200 per acre.
“Sometimes the profit is ($120 to $160 per acre), so it’s amazing.”
Eighteen companies have been contracted to pave the highway, and an estimated 70 percent of the road is ready for asphalt. Highway BR-163 should be fully paved within two to three years.
He anticipates the highway project will lead to the conversion of 40 million acres of pastureland into soybean production in the state of Mato Grosso.
To put that in perspective, farmers grew about 71 million acres of the crop in Brazil last year.
Scheffer said it’s only a matter of time before all that pastureland is growing soybeans.
“In the next seven years for sure it will be converted. For sure,” he said.
The only way it won’t happen is if Chicago soybean prices fall to $10 to $11 per bushel and stay there for a couple of years.
Scheffer said the conversion would still leave 22 million acres of pastureland in the state, land that is unsuitable for conversion into crop production.
Adding 40 million acres of soybeans in one state in Brazil over the next seven years will obviously affect world oilseed markets.
The magnitude of the impact is yet to be determined because it will depend on what happens with soybean demand in the coming years.
“The only thing I know is we’ll be more competitive than we are today,” said Scheffer.
The soybeans will be shipped into markets such as China, Indonesia, Pakistan, Bangladesh, Norway, Switzerland and Sweden.
Scheffer said soybean trucks are already using the road, but it is a hazardous journey. Trucks repeatedly break down or become bogged down in the mud.
As well, only two buyers compete for product in the northern ports, so the savings have yet to materialize.
However, Mato Grosso farmers will see increased competition and cost savings when more soybeans start flowing to those ports.
