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Brazil Removes Obstacles To Dethrone The US As The Top Maize Exporter

Brazil Removes Obstacles To Dethrone The US As The Top Maize Exporter
Brazil is expected to surpass the United States this year as the leading exporter of maize, thanks to a strong crop and logistical innovations like the combining of northern export lines that are enhancing the competitiveness of the South American grains giant.
According to a Reuters study of grain shipping data, maize exports through Brazil's northern ports, which use the Amazon River basin's waterways to carry grains internationally, are on course to surpass volumes via the most conventional port of Santos for a third straight year.
The change demonstrates how Brazil is gradually getting over some of the infrastructure obstacles that have long made it difficult to move its abundant harvests to international markets. Brazil produces three crops of maize annually and still has vast tracts of underutilised farm land.
In contrast to the previous time the Brazilians briefly held the global maize throne during North America's drought-hit 2012/13 season, this plus a new supply agreement with China revealed last year imply Brazil may be beginning a prolonged age of domination over U.S. corn exports.
Due to difficulties caused by the conflict in the main grain exporting country of Ukraine and trade disputes between the U.S. and China, Brazil was able to fill gaps in the global maize market with the aid of its enhanced export capacity.
"We celebrated a lot... when (corn export) volumes via northern ports equaled Santos," said Sergio Mendes, head of Brazilian grain exporter group Anec. "By using northern ports... you are saving 20 reais ($4.12) per ton (of corn)."
Significant new investments in Brazil have started to open up multiple chokepoints and dramatically reduce logistics costs, which has helped undercut American farmers.
A 2013 rule that encouraged grain dealers like Cargill and Bunge and barge operator Hidrovias do Brasil to develop additional private-use port terminals (TUPs) has benefitted northern export routes in particular.
They have connected the centre of Brazil's agricultural region with emerging Amazonian ports like Itacoatiara, Santarem, and Barcarena through their transshipment facilities on the Tapajos and Madeira rivers.
According to information provided by the companies, the Tegram grain terminal at Itaqui, which was developed and run by foreign and Brazilian grain traders like Louis Dreyfus Commodities and Amaggi, increased its grain export volumes by 306% in eight years to more over 13 million tonnes in 2022.
In contrast to a conventional concession for a brief period, the TUP legal framework has enabled a surge of long-term port investments in Brazil. According to a 2020 report by Brazil's TCU federal audit court, almost 39 billion reais ($8.0 billion) had been invested on constructing and expanding 112 new private-use terminals under the new law.
However, Brazil's agricultural sector is still dealing with certain logistical issues. Compared to rival grain superpowers like Canada, the United States, and Argentina, on-farm storage capacity still pales in comparison.
According to state government data until 2021, the storage gap had increased to 46 million metric tonnes in Mato Grosso, the country's top grain-producing state, as the annual maize harvest tripled in size over the previous ten years to over 90 million tonnes, quicker than new silos could be constructed.
Brazilian farmers are compelled to sell their harvests soon due to a lack of storage space, or they must store their maize outside of warehouses in the hopes of favourable weather. Because of this, a sizable portion of the harvest in Brazil clogs onto the highways during a little window of time, which can result in exorbitant traffic congestion.
The increased export capacity has made it possible for farmers in the United States to compete with Brazil's northern ports for the transportation of crops.
Using Brazil's northern ports would have cost 77% less to carry a tonne of soybeans from Iowa to Shanghai in 2008, but shipping it from the United States would have cost 5% more by March 2023, according to statistics from the U.S. Department of Agriculture and Brazil's ESALQ-LOG. According to ESALQ-LOG's logistics research coordinator Thiago Pera, freight values for maize are quite comparable.
The southeastern port of Santos, long the hub of Brazilian grain exports, and the Amazon basin are now competitors.
According to Brazil's agricultural agency Conab, 37% of Brazil's total maize exports passed through the ports of Barcarena, Itaqui, Itacoatiara, and Santarem in the first half of 2023. Only 24% of it passed through Santos.
Before significant investments increased port capacity in the Amazon region, Santos exported nearly three times as much maize in 2015 as those four northern ports.
"The greater share of shipments through northern ports reflects cheaper freight costs compared to routes to the ports in the south and southeast," said Thome Guth, a Conab official.
Conab predicts that Brazil will produce the most maize ever in 2023, with exports expected to hit 50 million metric tonnes for the first time.
A large part of the reason for the drop of maize futures in Chicago from a 10-year peak in April 2022 to a two-and-a-half-year low this month is the abundance of Brazilian supplies.
Even if reduced prices may deter farmers from growing plants as quickly, Brazil's booming export infrastructure shows little sign of slowing down.
Following the acquisition of a 25-year licence to run a facility with a 14 million tonne capacity, the Chinese state-owned trader COFCO is now constructing a sizable new grains port at Santos. Beginning in 2026, shipments will be made at COFCO's STS11 terminal.
The BR-163 roadway, which runs over 1,000 kilometres (625 miles) from Mato Grosso to ports in Para state, has also been updated thanks to a licence awarded two years ago.
For many years, when it rained while they were travelling to northern ports, grain truck caravans would frequently become stranded in deep muck on the road.
Despite the numerous regulatory barriers that still stand in the way of major rail projects, several have already begun the design phase.
The Ferrovia Norte Sul, which began in 2019, just received a 4 billion real investment from Rumo, the largest rail corporation in Brazil. By connecting Santos port to the agricultural states of Tocantins, Goias, Minas Gerais, and Mato Grosso, the railway strengthens another crucial route for transporting Brazilian harvests to the world. 

Christopher J. Mitchell

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