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March 9, 2017

Brazil's "Grain Railroad" Moving Closer to Reality

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The Brazilian Transportation Minister indicated earlier this week that the feasibility studies for a railroad liking Mato Grosso with the Amazon River are in the final stages and that they should be completed in the next few months. He indicated that the bidding process for the construction of what is being called the "Grain Railroad" will be conducted during the second half of 2017. The R$ 12.6 billion project will link the city of Sinop in northern Mato Grosso with the Port of Miritituba on the Tapajos River. From there, the grain would be barged to other ports near the mouth of the Amazon River.

The final route of the railroad has not yet been determined because local authorities in Mato Grosso would like to see the railroad extended further south in the state in order to encompass more grain producing regions. The original length of the railroad is calculated at 933 kilometers, but if it is extended to the city of Lucas do Rio Verde, the length would then be 1,100 kilometers.

For the time being, the Grain Railroad will probably only be built until the city of Sinop. It could be extended southward in the future to join with the Ferronorte railroad as it is being constructed northward from southern Mato Grosso. If those two railroads were to connect to each other, there would then be a continuous rail link from the Amazon River to the Port of Santos in southeastern Brazil allowing grain to be shipped out of Mato Grosso in either direction.

The possibility of a new railroad is coming at a critical time as grain production is increasing but the current infrastructure is inadequate to handle the increase. The inadequate infrastructure was on display recently when highway BR-163 linking Mato Grosso and the Amazon River was essentially blocked for three weeks due to heavy rains that turned the unpaved sections of the highway into a giant impassable mud hole.

Major grain companies such as Amaggi, ADM, Bunge, Cargill, Dreyfus, and others are keenly interested in the new railroad, but at this point, it is unclear if they will participate in the bidding process to construct the railroad.

It is estimated that by the year 2025, the Port of Miritituba, which is part of what is called the "Northern Arc" of ports in Brazil, will export 35 million tons of grain on a yearly basis. Shipping grain north to the Amazon River instead of south to ports in southern Brazil is expected to reduce transportation costs by 40%.