Brazil overcomes obstacles to unseat the US as the leading corn exporter

Brazil will overtake the United States this year as the world’s leading exporter of cornthanks to a bumper harvest and logistical advances such as the consolidation of export routes in the north, which are boosting the competitiveness of the South American cereal powerhouse.

Corn exports through Brazil’s northern ports, which use the waterways of the Amazon River basin to ship grain around the world, are on track to surpass volumes through the more traditional port of Santos for a third consecutive year, according to a Reuters analysis of grain transportation data.

The change highlights how BrazilGrowing three crops of maize a year and still boasting vast tracts of underutilized farmland, , is finally overcoming some of the infrastructure bottlenecks that have long made it difficult to transport its bountiful crops to world markets.

That and a new supply deal with China announced last year suggest Brazil may be ushering in a longer era of supremacy over US corn exports, unlike the last time they briefly grabbed the global corn crown during the 2012/13 North American season affected by drought.

The better export capacity has helped Brazil to plug gaps in the global corn market during disruptions caused by the war in Ukraine, the top grain exporter, and the US-China trade tension.

“We celebrated a lot (…) when the volumes (of corn exports) through the northern ports equaled those of Santos“, said Sergio Mendeshead of the Brazilian grain export group Anec. “Using the northern ports (…) saves 20 reais (US$4.12) per ton (of corn)”.

The new and important investments in Brazil they have begun to alleviate various bottlenecks and drastically reduce logistics costs, which lowers prices for American farmers.

Northern export routes, in particular, have benefited from a 2013 law that encouraged grain traders like Cargill and Bunge, and barge operator Hidrovias do Brasil, to build new private-use port terminals (TUPs). .

Transshipment stations on the Tapajos and Madeira rivers have connected the heart of Brazilian agriculture with emerging Amazonian ports such as Itacoatiara, Santarem and Barcarena.

Tegram’s grain terminal in Itaqui, built and operated by foreign and Brazilian grain traders including Louis Dreyfus Commodities and Amaggi, increased its grain export volumes by 306% in eight years, to more than 13 million tons in 2022, according to data provided by the companies.

The legal framework of the TUP, unlike a traditional concession for a limited period, has unlocked a wave of long-term port investments in Brazil. Some 39 billion reais (US$8 billion) have been invested in the construction and expansion of 112 new terminals for private use under the new law, according to a study carried out in 2020 by the Brazilian Federal Court of Accounts (TCU). .

However, the Brazilian agricultural industry has not overcome all its logistical problems. On-farm storage capacity still pales next to rival grain powerhouses such as Canada, the United States and Argentina.

In Mato Grosso, the first cereal-producing state, the storage deficit has increased to 46 million metric tons, according to state government data until 2021, after the annual corn harvest tripled in a decade to more than 90 million tons, faster than new silos have been built.

Lack of storage space forces Brazilian farmers to quickly sell their crops or pile corn outside warehouses and wait for good weather. As a result, much of the Brazilian crop is piled up on the roads during a narrow seasonal window, which can cause costly traffic jams.

Cheapest route to China

The new export capacity has helped grain shipped from Brazil’s northern ports compete on logistics costs with US farmers.

Sending a ton of soybeans from Iowa to Shanghai in 2008 cost 77% of the price of using the ports in northern Brazil, but in March 2023 it was 5% more expensive to send it from the United States, according to data from the United States Department of Agriculture. States and ESALQ-LOG of Brazil. In the case of corn, the freight rates are very similar, says Thiago Pera, logistics research coordinator at ESALQ-LOG.

The Amazon basin has also become competitive with the port of Santos in the southeast of the country, which has long been the nerve center of Brazilian grain exports.

Some 37% of Brazil’s total corn exports passed through the ports of Barcarena, Itaqui, Itacoatiara and Santarem in the first half of 2023, according to the Brazilian crop agency Conab. Only 24% went through Santos.

By comparison, Santos exported almost three times as much corn as those four northern ports in 2015, before heavy investment expanded port capacity in the Amazon region.

“The higher proportion of shipments through northern ports reflect cheaper freight costs compared to routes to southern and southeastern ports”, said Thome Guth, a Conab official.

Conab forecasts that Brazil’s total corn production in 2023 will be almost 130 million metric tons, the highest in history, and that exports will reach 50 million metric tons for the first time.

Chicago corn futures have fallen from a 10-year high in April 2022 to a 2-1/2-year low this month, partly due to generous supplies from Brazil.

Brazil’s thriving export infrastructure shows little sign of abating, though lower prices may deter farmers from expanding plantings so quickly.

The Chinese state company COFCO is building a major grain terminal in Santos, after obtaining a 25-year license to operate a unit with a 14 million-ton capacity. Shipments from COFCO’s STS11 terminal are scheduled to begin in 2026.

A highway license issued two years ago has also modernized a key Amazonian grain corridor that stretches more than 1,000 kilometers from Mato Grosso to Pará state ports, known as BR-163.

For years, caravans of grain trucks regularly got stuck in the deep mud of that road when it caught the rain on their way to the northern ports.

Large rail projects continue to face a host of bureaucratic hurdles, but some have come off the drawing board.

Brazil’s largest railway company, Rumo, has just completed a 4 billion reais investment in the Ferrovía Norte Sul, which began in 2019. The line connects the port of Santos with the agricultural states of Tocantins, Goias, Minas Gerais and Mato Grosso, reinforcing another key route to bring Brazilian crops to world markets.