SAO PAULO Oct 16 A new northern front is opening in the battle for a share of Brazil's burgeoning soy and corn exports as a highway decades in the making finally opens, offering a shortcut through the Amazon jungle to northeastern waterways.
The so-called BR-163 connecting Mato Grosso state's soy belt to two key river ports will boost grain exports by some 3 million tonnes next year, offering a bit of relief to congested ports in the southeast, where most shipments originate.
At one of those northern ports is a new terminal owned by global trader Bunge. At another is a decade-old facility run by rival Cargill, which is angling to quadruple exports through the area in the coming years.
Both look set to face even more competition as other companies make plans to build terminals across the sprawling northern waterways, using a mix of road and barge logistics to get Brazil's expanding harvests to market.
To be sure, BR-163, long behind schedule, offers only modest relief for the moment. The 1,385-kilometer (860-mile) stretch of road won't be entirely paved in Para state for a few more years. Sink-holes already abound, making it a fraught journey, even for truckers accustomed to Brazil's rutted roads.
But it is now considered passable, and for the first time in years, Brazil's overstressed transport grid has a new route.
"We've been exporting through the wrong route, to Santos and Paranagua," said Carlos Favaro, president of Mato Grosso's soybean association Aprosoja, referring to the ports on the southern coast. Ships there had to wait for 60 days to load grains last year and some frustrated buyers canceled orders.
Northern flows are already gathering pace. In August, 14 percent of the corn shipped from Mato Grosso, or 280,000 tonnes, left through the Port of Santarem on the Amazon river according to Mato Grosso state's farm research institute, up from next to nothing in all of 2012.
The benefits are easy to calculate: Freight costs from Sorriso, Mato Grosso, to Santarem, Para, were already 240 reais ($109) per tonne in August, versus 280 reais it cost to ship to Santos, which is 600 kilometers farther away.
With the new highway humming, freight costs to Santarem could fall by a third next year, Aprosoja says.
Many farmers have been waiting for the BR-163 to be paved since they migrated to Mato Grosso, deep in South America's interior, from southern Brazil more than 30 years ago.
The government knows that shipping more grains through the main two ports in the southeast is no longer viable in Brazil, now the world's top soybean exporter. Last year roads were so clogged that some chose a 1,600-kilometer detour to the far southern port of Rio Grande.
To solve the problem, in May Congress passed legislation to allow private firms to invest in public ports, many located in the northeast.
No one knows the area's potential and challenges better than Cargill, which for about 10 years has operated the only grains terminal in Santarem.
Until recently, Cargill trucked almost all of its soy west from Mato Grosso, away from the eastern seaboard, 1,500 kilometers to the small river town of Porto Velho, Rondonia, where it is loaded on barges that then sail east to Santarem, and on to the Belem port on the coast.
But the BR-163 will give the company a more direct route north to Santarem.
"The BR-163 has some traffic, even though 400 kilometers still need to be paved," said Clythio Buggenhout, port director for U.S.-based Cargill. "The road is now relatively viable."
Usually, Cargill moves about 1.3 million tonnes of grains through Santarem, almost all from Rondonia, but in 2014 that amount could be about 2 million tonnes due to the increase in road capacity from Mato Grosso, he said.
While the highway has unlocked a northern gateway all the way to the Amazon River, it is the shorter Tapajos River that flows north from Mato Grosso into the Amazon that shippers are counting on to reduce freight costs even further.
The Tapajos port of Miritituba, south of Santarem, shaves nearly 300 kilometers off the drive. Some barges loaded there will take their cargoes to Santarem or other larger river ports, while others may sail as far as Vila do Conde on the east coast, considered the most accommodative port for large tankers because it has a deeper exit to the ocean than the Amazon river.
"We believe the potential of the Tapajos for Brazilian agribusiness is infinitely bigger than the Mississippi," said Kleber Menezes, president of the Tapajos private terminals association. "No locks, no dredging - it is a divine waterway."
The Tapajos could move 20 million tonnes of grains, with six terminals in operation by 2020, he said.
Cargill plans to invest 300 million reais, between Miritituba and expanding capacity at its Santarem terminal.
"Our idea for Santarem is to get to 5 million tonnes, 1 million arriving by road and 4 million from the rivers, between Porto Velho and Miritituba," Buggenhout said.
While Cargill is waiting on environmental permits to build a terminal in Miritituba, Bunge is ready to operate at the port on the Tapajos river.
Its terminal can handle 3 million tonnes a year, but Bunge is likely to export just 2 million tonnes in the 2013/14 season that is just starting according to Edeon Vaz, who heads the "Pro-logistics" movement for soy association Aprosoja. Bunge declined to comment.
Besides Bunge, Archer Daniels Midland Co's and Hidrovias do Brasil hope to open terminals in Vila do Conde, permitting access from larger ships. Hidrovias plans to open a 4.4 million tonne capacity terminal by 2016.
Skeptics question whether all the bold plans will come to fruition. Brazil has struggled for years to attract private investment in its roads and railways. The BR-163 is still behind schedule and there are concerns that the weight the road can bear is limited.
But for Mato Grosso's farmers, the opening of new routes next year is a long overdue sign of hope.
"It's not going to solve the problem because this is just the beginning -- but the important thing is that shipments are definitely being made through the north of the country," said Favaro of Aprosoja.