Soybean Logistics in Brazil

September, 2010

• Mato Grosso Soybean and Corn Growers Association

• Founded in February 2005

• 5000 Growers in 18 Districts

• Farmers pay compulsory checkoff of US$ 1 per hectare

• Founder of Aprosoja Brasil, ARES, Instituto Ação Verde

• International partnerships with soybean associations

• Main goal is to increase competitiveness of Mato Grosso

corn and soybean farmers.

Aprosoja

Source: Anuário Exame 2008

Main Problems of Brazilian Agribusiness – Exame Magazine Survey

Importance of Logistics in Agribusiness

Margem

MT - N -24,8%

MT - C -21,6%

MT - NE -20,2%

MT - S -12,4%MS - S -9,1%

BA -5,6%

MS - N -3,1%

GO -2,7%

MG -2,7%

TO -1,9%

MA 0,8%PI 1,6%

PR 3,0%

SP 3,8%

DF 6,5%

RS 6,8%

SC 8,7%

Margem

MT - N -24,8%

MT - C -21,6%

MT - NE -20,2%

MT - S -12,4%MS - S -9,1%

BA -5,6%

MS - N -3,1%

GO -2,7%

MG -2,7%

TO -1,9%

MA 0,8%PI 1,6%

PR 3,0%

SP 3,8%

DF 6,5%

RS 6,8%

SC 8,7%

HIG

HER

CO

STS

Basis range from U$

0,5 to U$ 2,7/bu +/-

Port Basis

US$ 100/ Ton

US$ 20/ Ton

Source: Céleres / Aprosoja

16%

36%

25%

8%

5%

5% 2%

Soybean Production in Brazil – Logistics Costs

Why Transportation Costs are Important to Farmers

FOB SANTOS: US$ 448/ton

= Price to Farmer: US$ 302/ton @ 1.72 FX

(-)Port Costs: R$ 20,00/ton

(-)Transport Costs: R$ 215,00/ton

(-) Origination Costs: R$ 16,00/ton

-------------------------------------------------------

Source: Aprosoja

Sorriso,

Mato Grosso Santos Port

= Price to Farmer: US$ 316/ton @ 1.90 FX + 4,6%

Source: Centrograos, Caramuru and Soy Transport Coalition, Aug.2010

Shangay, China

Santos, Brazil

New Orleans,

USA

Sorriso, Mato

Grosso

Illinois, USA

Transportation Costs Benchmarking

Barge

US$ 25/Ton

Road

US$ 125/Ton

US$ 46/Ton

US$ 45/Ton

Brazilian Logistics costs +139%

Deficient Port System

Soybean Transportation Problems - Brazil

Construction of New Roads

High Rail Costs

High share of road in the transport mix

Lack of storage

Problem 1 Strategies

• BR 163 from Mato Grosso to Santarém (Pará)

• BR 158 from Mato Grosso to Pará state

• BR 242 connecting East and West Mato Grosso

• BR 080 from Mato Grosso to Goiás State

Construction of

New Roads

Main roads in construction or projects

Source: Cargill, 2010

Transportation Problem # 1

BR 163

BR 158

BR 242

Source: Cargill, 2010

Transportation Problems BR 163

“Redneck” Public-Private Partnerships

Lucas-Tapurah Road (96km) in 2002 Lucas-Tapurah Road (96km) now

Numbers of the “Redneck” partnerships

Soybean farmers and the State Government built more than 2.000 km in the state of

Mato Grosso through these partnerships.

Source: Aprosoja/ SINFRA-MT

Transportation Cost Reductions with BR 163

Sorriso – A. Araguaia, MT

835 km

Alto Araguaia - Santos, SP

1.100 km

Source: Aprosoja

Total: 1.935 km

Route Ferronorte

Sorriso – Santarém, PA

1.344 km

Total: 1.344 km

Cost Reduction: US$ 30/Ton

Route BR 163

Problem 2 Strategies

• Expansion of the mesh

• Elimination of bottlenecks of the current railroad mesh

• Stimulate competition through change in regulatory framework

High Rail Costs

Rail Rates (US$ per 1.000 tku)

Source: Cargill, 2010

US$ 20

USA

US$ 41

BRAZIL

Transportation Problem # 2

Source: USDA (1) Memphis

Land Use in Brazil Land Use in Brazil Infrastructure Problems

Rail Analysis

Source: ANTF

Domain Strip Invasion Santos Port Access Level Crossings

Improvement of the Regulatory Framework

• Separate the infrastructure concession from the transportation and freight services;

• Allow two or more transport service providers to use the same infrastructure;

• Increase the number of transport service providers;

• Increase access to the rail infrastructure – isonomy;

• Stimulate competition in the transport of goods;

Source: ANTT

Problem 3 Strategies

• Development of waterways (Teles Pires-Tapajós and Tocantins-

Araguaia)

• Improvement of Tiete River Waterway

• Expansion of the rail mesh

High share of road

in the transport mix

Rail Rates per 1.000 tku

Source: ABIOVE

Transportation Problem # 3

Source: ANTF / COPPE

Railways

Ports

System

Transportation System Benchmark

Source: Aprosoja

Rondonopolis

East-West RR

Midwest Railroad

North-South Railroad

Ferronorte Railroad

Expansion Projects of the Rail Mesh

Source: Ministério dos Transportes, IBGE, ANTF and CIA Factbook.

Transportation Cost Reduction Alternative - Waterway

Sorriso – A. Araguaia, MT

835 km

Alto Araguaia - Santos, SP

1.100 km

Source: Aprosoja

Total: 1.935 km

Route Ferronorte

Sorriso – Cachoeira Rasteira, MT

715 km

Total: 1.758 km

Cost Reduction: US$ 50/Ton

Route Teles Pires-Tapajós Waterway

Cachoeira Rasteira – Santarém-PA

1.043km

Source: Cargill

Santarém- PA

Porto Velho - RO

2 Ports

7 Storage Facilities

43 Barges, 5 Towboats, 2 “Bull Truster”

(Transportes BERTOLINI)

650 Trucks

Case of Success: Madeira River

Cost Reduction: R$ 70,00/Ton

Problem 4 Strategies

• Solution of the debt problem – credit

• Tax incentives for grain handling and storing

• Low interest rate credit lines for the construction of grain storage

facilities

Lack of storage

Grain storage problem in Brazil (all grains and oilseeds)

155,3126,1

186,4

60,26

0,0

50,0

100,0

150,0

200,0

Production* Storage Capacity Optimum Capacity Storage Deficit

MM

T

Brazilian Grain Storage

Source: Conab, Anut and Aprosoja / * Soybean, corn, rice, weat, sugar and coffe, 2007

Transportation Problem # 4

Problem 5 Strategies

• Development of the Northern Ports (environment permits)

• Bureaucracy in the concessions (e.g. TEGRAM)

• Poor truck access and rail infrastructure

• Slow dregging in main ports

Deficient Ports

System

Brazil International Agricultural Trade Forecast (milion Tons)

Exports

(* Agricultural Procucts)

Imports

(Fertilizers + Wheat)

Source/ Projection: ANUT (2008)

* Agricultural Products: Soybean complex, corn, coffee, sugar, ethanol, pulp, meats

Transportation Problem # 5

+ 105% 221

108

Brazil’s Northern Ports

Exports by Port (2009)

Source: Aprosoja

15%

Problems Strategies

Deficient Ports

System

Summary

Construction of

New Roads

High Rail Costs

High share of road

in the transport mix

Lack of storage

• BR 163 from Mato Grosso to Santarém (Pará)

• BR 158 from Mato Grosso to Pará state

• BR 242 connecting East and West Mato Grosso

• BR 080 from Mato Grosso to Goiás State

• Expansion of the mesh

• Elimination of bottlenecks of the current railroad mesh

• Stimulate competition through change in regulatory framework

• Development of waterways (Teles Pires-Tapajós and Tocantins-

Araguaia)

• Improvement of Tietê River Waterway

• Expansion of the rail mesh

• Solution of the debt problem – credit

• Tax incentives for grain handling and storing

• Low interest rate credit lines for the construction of grain storage

facilities

• Development of the Northern Ports (environment permits)

• Bureaucracy in the concessions (e.g. Tegram)

• Poor truck access and rail infrastructure

• Slow dregging in main ports

Cattle Productivity:

36 Kg / hectare

Soy + Corn

8.000 Kg / hectare

Low Productivity pastures could be converted into

Soybeans with better logistics

170 Million hectares

Source: IMEA

Water

Land

Source: FAO (2000); FAO (2007). Elaboration: ICONE

Brazil: Potential to be the Agricultural Superpower

Marcelo Duarte Monteiro

CEO

marcelo@aprosoja.com.br